Mortgage 101

The initial step in the mortgage process is to confirm how much you need and how much you can afford to borrow. Lenders, in general look at two important factors: the value and type of the property and the wiliness and ability of the borrower to repay the loan.  If you are considering buying a home then getting pre-approved is best before even looking for a home.

The loan process starts with filling in a mortgage application which you can do which ever way is most convenient for you, via my easy online application, by phone, fax or in person.

Once you have completed the application, we will want to discuss which loan type, interest rate and repayment options are best for your particular needs before submitting your application to the best lender offering the best rate and the best terms. I shop – you save!

How long are you planning on staying in your home? Is your income expected to increase or change? Do you want the stability of a fixed rate or are you willing to risk, but potentially save with a variable interest rate? These are just a few of the important issues that we will want to discuss when we meet.

Of course the lenders will want you to confirm your financial and credit worthiness. The two most common requirements the lenders will want for the approval process are the Income Verification and the Confirmation of the Down Payment.

The Income Confirmation is almost always required and it can come in a number of different sources.

  • The Employment Letter: Stating employment position, current income, tenure (full time or part time), and the length of employment for all applicants. Where the tenure is less than 6 months confirmation that there is no probationary period may be required.
  • Recent Pay Stub: Showing your Year To Date details.
  • T4 or Tax Return: Your most recent T4 filed or the copy of the details page of your general T1 General Tax Return if completed by a tax service.
  • Notice of Assessment: This is the form that you receive back from Revenue Canada after they have processed your taxes and confirms the filing, and any amounts due to you or owed to you.

The Down Payment Confirmation must confirm that the down payment funds are not borrowed and several accepted practices for confirmation.

  • Bank Statements: The lenders will want to look at three months of banking history with the downvpayment being on deposit. If there is a recent lump sum payment, the lenders will ask for confirmation of the source of these funds.
  • Investments: If you are liquidating your RRSP, GIC or Stocks for your down payment the lenders will require confirmation such as account statements and the transaction records.
  • Gift Letter: When part of, or the entire down payment is coming in the form of a Gift, commonly from the “bank of mom or dad” then there must be a Gift letter signed by the donors that the down payment gift is genuine and does not need to be repaid.

Once your application for your loan or mortgage is approved I will send and review with you the mortgage commitment. The lender may wish additional documents or additional confirmation.

The last steps are the legal steps. The lender will forward the mortgage instructions to your lawyer or notary and you will need to meet with your attorney to sign the final loan documents. It is important to review prior to signing to verify the names and addresses are correct and please make sure that the interest rate and terms of the loan are what were promised.

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