You have to understand the process and be fully ready before even starting your Mortgage application. Being ready is essential because there is a limited time after accepting your purchase offer. According to data supplier ICE Mortgage Technology, the average time to close a mortgage transaction is approximately 43 days, while some loan types may require a little more time.

You can be ready to go right into the process by becoming familiar with the mortgage application procedure. Nine stages must be completed to successfully submit a mortgage application, whether you are refinancing, renegotiating your current mortgage, or applying for a mortgage for the first time.

The Mortgage Application Process

The following are the steps involved in applying for a mortgage:

Step 1: Determine the Function of Your Mortgage Professional

After deciding you’ll require mortgage financing, you have two options: deal with a lender directly or use a mortgage brokerage and its authorized brokers and agents. You can deal directly with various lenders, including credit unions and banks.

These financial institutions are frequently accessible to mortgage brokerages and their employees. Furthermore, mortgage brokerages have access to private, specialized, and alternative lenders (many of whom are exclusively available through level 2 mortgage agents or mortgage brokers unless the lender is exempt from needing a brokerage license or holds one).

Licensed experts known as mortgage brokers and agents act as go-betweens in the financing process, putting you and the lender in contact. With access to numerous lenders, mortgage brokerages (as well as their brokers/agents) generally act on behalf of the borrower to locate a mortgage lender and product that best fits their needs, both personally and financially.

Mortgage experts who hold licenses have fulfilled particular educational, professional, and suitability standards. Mortgage brokers or agents should outline the important details of the transaction, like costs, services rendered, and the data you will be required to furnish and provide you with information regarding their function. Make sure you obtain this information in writing and ask questions.

Step 2: Examine your standards

When you deal with a mortgage company, broker, or agent, they will gather personal and financial information to ensure the product they suggest fits your needs.

You must submit certain documents and information for the mortgage application process. Developing a list of your criteria in advance is wise to facilitate a quicker and easier approach.

Your mortgage broker, agent, and lender will use this information to better understand you, your objectives for the loan or renewal, and the kind of mortgage you need or desire.

Make sure to incorporate the following:

Your financial situation
Your possessions
Your sources of funding and income include jobs
Your goals and needs regarding a mortgage
Your familiarity with mortgages
Your choice about the sum, interest rate, duration, amortization, and terms
Your comfort level with changes in rates or the market (often referred to as your risk tolerance)
Additional participants in the transaction, if any
Details, if known, concerning the property that will serve as the mortgage loan’s security
All of your outstanding debts
If you are a first-time home buyer, the amount of down payment you have saved
Ensure your mortgage specialist knows if you are unfamiliar with mortgage finance so they can take extra time to walk you through the process. Ensure you understand any advice before signing a contract, and don’t hesitate to ask questions.

Buying a property is one of the most frequent uses for a mortgage loan. If you own a property, you can borrow money against its value to pay for repairs or other necessary expenses.

Homeowners occasionally take out a mortgage on their property to withdraw the funds and invest them elsewhere. Before making investments with borrowed funds, examine the dangers. You risk losing all your money, no matter what you decide to invest in.

Even if your investments lose money, you would still be obligated to repay the mortgage loan if you took out a loan against your house to make investments. If this isn’t done, there may be more costs, penalties, default, foreclosure, or power of sale.

Step 3: Choose a Provider

Any corporation, individual, or group of individuals that makes loans of money using real estate (like a house) as collateral is known as a lender. The asset serves as security to guarantee loan repayment. The money (the principle) is given to the borrower by the lender, who then makes arrangements for it to be repaid to them over a certain length of time.

The borrower and the lender sign a contract outlining the specifics of the repayment arrangements, such as the interest rate, the payback period, the payment amount, and the frequency of payments.
The mortgage broker or agent will use the financial and personal data you have supplied to match your demands with a mortgage lender and product appropriate for you and your situation. They will then recommend a lender and product.

Step 4: Obtain Pre-Approval for a Mortgage (for Home Purchases)

Before looking for a new house or mortgage provider, it’s a good idea to get pre-approved for a mortgage. A mortgage pre-approval can assist you in creating and adhering to a budget for purchasing a home.

Request that the mortgage broker or agent you collaborate with create a pre-approval application. Be aware that only some lenders will offer pre-approval for a mortgage.
Pre-approvals are normally given for two reasons and are a preliminary evaluation of your financial obligations and demands.

Should decide on (and adhere to) a budget before you begin your search for a home; and
to “hold” a particular interest rate for a predetermined amount of time. This implies that even if the rates for that product have increased, the interest rate provided on the pre-approval will remain valid if you submit a complete application within the allotted time and fulfill all other requirements.

Pre-approvals usually don’t need supporting paperwork, in contrast, to complete mortgage applications. If you want the broker, agent, or lender to assist you in determining how much you can actually afford, you should be as truthful and precise as you can about your financial situation.

After everything is finished, you should receive a formal confirmation, including the mortgage rate and maximum loan amount. Remember that a pre-approval does not guarantee that you will be granted a mortgage loan and that the offer is only valid for a predetermined period.

Step 5: Compile the Required Records

You will require certain papers to finish a mortgage application. While looking for a suitable property, gather these papers to help expedite and simplify the procedure. Lender requirements can differ, but generally speaking, the following are needed:

Details about your job, such as proof of pay (such as a pay stub, bank statements, CRA notice of assessment, or a letter from your employer)
Details on any additional sources of income you could have, if any
Your banking location
Evidence of any assets, such as savings accounts or RRSPs
Information on any debts, including student loans and other loans
Proof of your down payment for items, including its amount and source
A mortgage statement that displays the current mortgage balance is necessary for renegotiating or switching lenders (or confirmation of free and clear title to the property)
The property’s complete address
If relevant, a copy of the real estate listing
Your certificate of mortgage pre-approval, if one was obtained
Contact details for your notary or attorney
a duplicate of the purchase and selling agreement, if any
An estimate of the monthly expenses associated with dwelling, such as electricity and property taxes

The data you submit will be relied on by lenders and mortgage brokers/agents. They can use this information to identify the ideal mortgage for you. You must provide them with the truth when giving them information.

Application mistakes might quickly result in an inappropriate mortgage for you or your situation. You may face severe financial and perhaps legal repercussions if you intentionally provide incorrect information or misrepresent facts on your mortgage application.

If the information you supply is inconsistent, lenders and mortgage brokers/agents are expected to inquire further and seek further details. Different documents may be needed from different mortgage brokers, agents, and suppliers.

Step 6: Calculations for Qualification

Your mortgage broker or agent must confirm that you can make the installments to carry your mortgage loan. At the very least, they will accomplish this by comparing your housing debt(s) and overall debt(s) to your income through various debt servicing computations and analyses.
There are two primary percentage-based debt servicing computations.
Gross Debt Service (GDS) Ratio: This figure evaluates affordability by contrasting your income with the required housing expenses, which include the mortgage payment, property taxes, heating, and any related condo fees, if any.
Total Debt Service (TDS) Ratio: This figure combines all of your other debts and commitments, including credit cards, auto loans and leases, personal loans, and payments for child/spousal support. It also takes into account the cost of housing.

The amount of the (gross) income needed to cover housing costs (GDS) and the total amount of debt (TDS) is determined by the lenders after they evaluate these debts. There is a maximum % that can be applied to each figure depending on the lender and loan type.

These ratios don’t give you a complete picture of what you can afford; they are just recommendations. For instance, if your GDS is 35%, just 35% of your gross income is needed to cover housing costs. You will use 40% of your gross income, less known debts and obligations, to pay for housing if your TDS is 40%.

However, these ratios do not account for other affordability aspects, such as the cost of daycare, food, gas, cell phones, internet, etc. It’s not necessarily the case that you can afford a mortgage just because you qualify for one.

You will need to verify that you can carry the mortgage using the minimum qualifying rate and be eligible for the mortgage loan at the rate the lender offers. This rate, sometimes called the “stress test,” is determined by adding 2 percent to your lender’s offer rate or using the benchmark rate of 5.25 percent.

Step 7: Evaluation of Properties

The lender will demand verification of the property’s value because it serves as collateral for the mortgage loan. This can be accomplished in various ways, depending on numerous variables.
To ascertain fair market value, the lender may wish to see the property online with you, examine the listing on Realtor.ca or a self-listing website, or have a home inspection or property appraisal.

If you are purchasing a home, you might have to work out a deal with the sellers regarding access, and unless your lender pays for the appraisal and home inspection as a perk for signing up, you will be in charge of paying these costs.

Step 8: Finishing the Documentation for the Mortgage Application

You must complete the application whether you are working with a lender directly or through a broker. Basic details like your name, address, phone number, employer, income, and the number of dependents you have, as well as the name and location of your bank or other financial institution, will all be included in the mortgage application.

Additionally, the application will consist of information about:

Your possessions (RRSPs, mutual funds, etc.)
Liabilities, such as loans, leases, credit cards, and credit lines
The loan’s objective
The required amount of mortgage loan
What kind of mortgage loan
The amortization period and mortgage length
Rate of interest

An explanation of the property, including its size, kind, construction, and address
During this procedure, the broker is required to discuss the risks, responsibilities, and costs related to their service and the mortgage contract.

You must also sign a written acknowledgment attesting that your mortgage advisor revealed the risks related to the mortgage. If you are working with a lender, such as a bank, you will finish the application with them.

Additionally, a Credit Authorization Form granting the lender permission to run a credit check must be signed by you. Without your consent, a mortgage broker or agent cannot and should not request a credit report.

Step 9: Bargaining and Dedication

It could take the lender a few weeks to inform you whether the loan will be authorized after you submit your application. Based on the information and evidence submitted, the lender will draft an approval known as a “commitment letter,” which typically includes a list of requirements that must be fulfilled to proceed with the mortgage transaction.

The permission could be revoked if the information or supporting paperwork submitted to the lender changes. For instance, the commitment letter can state that it is subject to specific conditions, such as your credit score or debt servicing ratios being at or above a particular level.

A renegotiation or cancellation of the approval may be necessary if the lender examines your credit report and discovers a new debt or obligation that was not previously reported or if there is a notable change in your credit score. The commitment letter contains the specifics of the approval, such as the terms, interest rate, and total loan amount.

Mortgage Application Tips

Clear Communication Is Essential for a Quick Mortgage Approval

The mortgage application process involves many moving parts. It’s crucial to focus on open, efficient communication to prevent mistakes and omissions. Application mistakes might quickly result in a mortgage that isn’t the best fit for you. It’s also important to know that lying or misrepresenting facts on your mortgage application is prohibited and can have negative effects.

Avoid becoming a haphazard borrower.

Never apply for a mortgage on someone else’s behalf or pretend to be a house buyer. It is against the law to do so, a practice known as “straw borrowing.” You will ultimately be liable for the mortgage, may be sued by the lender, and face legal repercussions.

Say “no” to anyone who approaches you or offers you money to apply for a mortgage on someone else’s behalf. Make sure you supply correct data and authentic supporting paperwork. When in doubt, carefully review all documentation, ask questions, or get legal advice from a professional. Lastly, only sign a complete and accurate document.