MORTGAGE APPLICATION

If you’re confused by the mortgage process, let me help you understand each step.

1

PRE-APPROVAL

Initially you will meet with a Loan Officer or Mortgage Broker who will have you complete a RESIDENTIAL MORTGAGE APPLICATION.

2

SUPPORTING DOCUMENTS

The Loan Officer will then request a series of documents to support your income, your savings and your expenses.

3

PROCESSING YOUR APPLICATION

The Loan Officer will begin processing your application. At this time the lender will order an appraisal of the home, a copy of your current credit report and will make written requests to verify your employment and bank account balances.

4

CLOSING COSTS ESTIMATE

Within 3 days of completing your application, the lender will provide you with an estimate of closing costs and a booklet containing information about the closing costs you may incur in the transaction.

5

UNDERWRITER APPROVAL

Once the lender receives your credit report, appraisal and all the written verification requests, your loan package will then be forwarded to the underwriting department. They will evaluate your loan package and will either approve or deny your loan according to their OWN policies and guidelines.

6

THE FINAL STEP

You are probably saying "This is a lot of work! And there is still a chance I may be denied?" Yes!! Then you would have to begin the whole process over again with other Banks until you find one that has appropriate policies.

SELECTING THE BEST MORTGAGE FOR YOU

CONVENTIONAL VS. HIGH RATIO

A conventional mortgage is a loan for no more than 75% of the appraised value or purchase price of the property, whichever is less. The remaining amount comes from the borrower’s own resources and is known as the down payment.

A high ratio mortgage is used for loans that exceed conventional mortgage lending guidelines. These mortgages must be insured against default through Canada Mortgage and Housing Corporation (CMHC) or GE Capital Mortgage Insurance Canada (GEMICO). The borrower will have to pay the insurance premium, which can range from 0.50% to 3.75% of the total mortgage amount. Typically, the insurance premium is added to the principal amount of the mortgage. With a high ratio mortgage, people can purchase a home with as little as a 5% down payment.

DOWN PAYMENT AMOUNT

Note that mortgage rates are always in-flux and you may be offered a different rate from different lenders.

  • (% of purchase price or appraised value)  Insurance Premium
  • (% of total mortgage amount)  Terms Available
  • 5% 3.25%  3,4,5, and 10 years
  • 10%  2.00%  6 months, 1-5 years, and 10 years
  • 15% 1.75% 6 months, 1-5 years, and 10 years
  • 20%  1.00% 6 months, 1-5 years, and 10 years
  • 25%  Conventional – no premium (in most cases) 6 months, 1-7 years

Variable interest rate mortgages =  +0.25% surcharge.

CLOSED VS. OPEN

“Closed” means a mortgage which is for a fixed term and has fixed prepayment options. A closed mortgage usually offers a lower interest rate than an open mortgage. An “Open” mortgage may be for the same term as a closed mortgage, but any amount of principal may be paid off at any time, without penalty.

SHORT TERM VS. LONG TERM

A “short term” mortgage is usually for two years or less. A “long term” mortgage is generally for three years or more. Short term mortgages are appropriate when someone believes interest rates will drop come renewal time. Long term mortgages are suitable when current rates are reasonable and borrowers want the security of budgeting for the future. This may be important for first time home buyers. The key in choosing between short and long terms is to feel comfortable with your mortgage payments.

FIXED RATE VS. VARIABLE RATE

A “fixed rate” mortgage carries the same interest rate for the entire term. It allows homeowners to budget for any term selected, from six months to ten years. A “variable rate” mortgage is tied to an underlying interest rate, like the prime lending rate, and will rise or fall with changes in that underlying rate.

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Mortgage Application

All the steps you need to know.

 Mortgage Application

From the pre-approval process to picking the best mortgage.

Mortgage Terms

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 Mortgage Terms

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