Mortgage Approval Process
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January 31, 2018

The Mortgage Approval Process: How to Get approved for a mortgage?

The mortgage approval process is the key step in your home purchase. You’ll start the process after you’ve given the homebuyer an Offer to Purchase and he or she accepts it, that is if you weren’t already pre-approved. You must get a mortgage approval prior to moving forward with buying your home since your Offer to Purchase will be provisional pending financing.

The process is comparable to getting pre-approved: down payment and income details must be provided to your lender or mortgage broker, accompanied by precise details of the house you’re purchasing.

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You may be required to provide the following:

Down Payment

If the funds are coming from your Home Buyers’ Plan, you will need proof of withdrawal from your registered retirement savings plan. Investment and savings statements from the previous ninety days will be required if you’re using your own funds. Finally, if a member of your family is helping to fund your down payment, you will need a letter affirming that the money constitutes a gift, and not a loan.

Employment

Pay slips, a statement of reimbursement paid (T4) or a signed letter from you employer may be needed to verify income. Freelance and rental income, and dividends and other rental income must be declared as well.

Financials

Your lender will need an inventory of your current liabilities and assets. He or she will also need the deposit amount that stated in your Offer to Purchase, and a cancelled cheque for setting up mortgage payments.

The House

The lender will also need details such as the closing date and the location of the home. You’ll also need to supply a copy of the listing, and estimates for condo fees, property tax, and heating cost. In addition, you will be asked to produce copies of the home inspection or land survey, and the accepted Offer to Purchase contract, including the exact purchase price. Finally, your lender will need to know the name, address, and telephone number of your lawyer.

Your lender or mortgage broker will forward the application to one of the underwriters at the financial institution once you have provided all the details. They will use debt service ratios to establish if your application meets their standards. The usual turnaround to approve a mortgage is between four and eight hours.

What to do if Your Application is Rejected

There are a few things you can do if your application for a mortgage is rejected:

  • Get a parent or other relative to act as guarantor and co-sign the application for a mortgage
  • Seek a mortgage with a private lender or a trust company. These companies focus their business model on lending to homebuyers who can’t use the services of a mortgage broker, or who do not qualify to get a mortgage from a conventional lender such as a credit union.
  • Speak to an independent financial advisor specializing in mortgages, or a professional mortgage broker. They deal with a broad selection of lenders, and should be able to offer further advice on what approach you should take.

 

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