Frequently Asked Questions
Mortgage 101 - Common Questions
There are four common types of mortgages you can apply for, these include: Pre-approval, Home purchase financing, Refinancing of an existing mortgage, The mortgage switch
When applying for these types of mortgage loans, keep in mind that your credit will be checked and the lenders will require documents and details from you to accurately approve and provide you with the best mortgage terms.
You have made an offer on a home with confidence. Has the offer been accepted? If so, you have now made a commitment to buy a home. Some important steps must now be taken to get you unconditionally approved for the mortgage loan required to complete the purchase.
After you have made the Offer to Purchase a home, you will be required to provide more details like:
- When are the closing and the condition of financing dates?
- Do you have a home inspection appointment set?
- Have you let your lawyer know you will require their services for the closing of the purchase transaction?
- Where is the down payment coming from?
- What did you buy? – House, townhouse, condo?
- Is it new construction? If so, is this for a draw mortgage or completion?
- If this is a new condo; your realtor may be required to provide the condo budget, condo financials and bylaws
- Do you know which mortgage term you are looking for?
As always, I’m available to walk you through this process. I will work with your real estate agent directly to make sure things go smoothly for you during this purchase transaction.
Whether you are borrowing $100,000 or $1,000,000, all lenders need to see certain documentation to verify your identity, your income and the ability to not only borrow the money, but pay it back on time and as agreed in the terms of the mortgage agreement.
Being informed about the details will make the experience more enjoyable and efficient. Below we have compiled a general list of documentation that any Canadian bank or mortgage lender will require in order to fund your mortgage. Please keep in mind that individual situations may require more or less documentation.
General Income Proof
Salaried, full time employee – you will most likely be required to provide a job letter and current pay stub to Mortgage Rate Canada.
Self-employed – your NET income will be used to qualify you. Usually 2 years NOA’s (Income Tax Notice of Assessments), incorporation papers and/or something to show you are self-employed or own your company is required to prove this NET income.
Some self-employed Canadians pay themselves a salary and issue themselves T4’s. Many lenders will require at least 2 years of T4’s, incorporation papers and, in some cases, an accountant’s letter.
Paid an hourly wage – be prepared to provide a job letter and current pay stub. Include any overtime income and make sure it’s noted on the application. If you want to include that overtime income on the application, we may need up to 2 yrs NOA’s (Income Tax Notice of Assessments) or T4’s to average the overtime income.
Do you pay or receive any child support or other support? Any documentation on this may be requested.
- Void cheque for the account you want mortgage payments to come from.
- Most recent mortgage statement (if you are refinancing, switching your mortgage or selling an existing home to purchase a different home).
- Your lawyer’s information so the lender knows who to send the mortgage documents and money to for closing the mortgage loan.
- Your down payment could be coming from one or more sources. Typically you would need to show (if applicable) – 3 months bank statements if in your savings/chequing account, an RRSP statement or gift letter with deposit slip. If your down payment is coming from the sale of another home then we will need that sale agreement, mortgage balance and/or statement of adjustments from the lawyer.
- Property Taxes – Paid by monthly installments or in full?
- If this is a new construction, you will be required to provide the New Home Warranty number, the specs or floor plans and any added upgrades.
A pre-approval is the “quick check” to find out what you can qualify for before you go house hunting. We will go through your preliminary info, for example learning about your income, assets and debts, to determine exactly how much you can borrow from a lender. Depending on the borrower and the situation, it typically takes as little as 4 hours to as much as 24 hours to be pre-approved.
For a pre-approval, you will likely be asked some questions like:
- Do you have a realtor?
- How much do you want to spend?
- What’s the maximum amount?
- How much down payment do you have to work with?
- What are you looking to buy? Townhouse, house, condo?
- Do you know what sort of mortgage term you are looking for? Fixed rate, variable or open mortgage?
Refinancing is very common in Canada. The purpose of refinancing is wide-ranging. Many clients refinance for a better interest rate than the one they currently have. Some will refinance and take out extra money to pay off other high interest rate credit card debt, car loans, student loans. Some will refinance to fully renovate or even to purchase a second home or rental property.
When refinancing, you will be asked some questions like:
- What is the value of your home?
- Is that value coming from the city assessment? Is there an appraisal completed already?
- Have there been any household improvements?
- What is your mortgage balance with payout?
- Which term and amortization are you interested in?
- Are you paying out any debts with this refinance?
Refinancing typically saves clients thousands of dollars each year and can shave years off of debt repayment. When making minimum payments on credit cards, the average time to pay off that account entirely is almost 30 years! If you have equity in your home, it may make sense to refinance and get rid of that high interest debt. The minimum amount of equity that must remain in your property (after a refinance is completed) is 20%.
Credit - A necessity
Your credit history is the #1 factor lenders look at when making decisions regarding your credit worthiness. Lenders (credit card companies, auto loan companies, mortgage companies etc.) will still give out credit to people who don’t have good credit history, but at a much higher rate.
Although this is really a general misconception, it’s one of the main reasons why people are afraid to fill out our online application. This reasoning can be justified. Even if an application appears to be secure, it doesn’t mean your data, once received, will remain secure. My office takes great steps to ensure that your personal information is safe during the transmission and forever afterwards.
The Secure Socket Layer (SSL) technology built-in to our online mortgage application uses military grade 128-bit encryption. To decipher the information sent to our secure document management system would be extremely unlikely, to say the least. Even if someone manages to filter out your information from the gigabytes of spam and other useless data that is clogging the Internet at any moment, it would still take them vast network of powerful computers a lifetime to crack.
And, unlike many other online transactions, we do not require your credit card or Social Insurance Number in order to perform our service.
Mortgage brokers are just like insurance brokers and today we have many more products available than all the major banks combined.
Completely False. Mortgage brokers in Canada do add fees, except for some files in which a fee is charged, simply because we are paid by the lenders. Unlike the big banks, most of the lenders we access do not have full-time salaried mortgage specialists on staff.
Nor do they have to cover the high cost of advertising on television, sending out junk mail, or printing thousands brochures to clutter up their teller stations. Our lenders simply rely on the expertise of mortgage brokers to connect their product to the public.
The mortgage broker only administers your mortgage. Most mortgage lenders will include your mortgage in a pool that is secure by another institution. Even if the mortgage lender stops operation or changes hands, your mortgage is still active and safe.
This statement is generally false for the majority of the ‘lending’ institutions in Canada, although there are the exceptions. But if you can’t see that ‘tree’ through the forest, you just may have a few mortgage lenders soliciting you.
Mortgage Rate Canada has adopted a ‘no spam – no popup’ policy and we DO NOT resell your information. You will never be solicited by email or subjected to any type of questionable marketing or spamming techniques.
When you go to your bank to secure a mortgage, it must go through certain channels before being approved. Some banks will even pre-approve someone without taking an accurate look at the file. This is misleading and time consuming and it happens often with the big banks.
Mortgage Rate Canada will immediately tell you what you are eligible for. After a brief analysis we can determine where your mortgage request will be best suited. Most of our lenders can have an answer back in less than 24 hours. Half the time your chartered bank or credit union can.
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