Posted on November 1, 2019 at 9:00 am by & filed under Buying a Home.

Negotiating and signing a mortgage agreement.

You’re about to embark on the journey of a lifetime. Buying a home can be such an exciting experience. Whether you are purchasing a home with a partner, significant other or yourself, there may be parts of the process that you find confusing or overwhelming. You don’t buy a new home every day, after all! That’s why the expertise and guidance of a local realtor can really come in handy. To help you with this process, we’ve put together a complete guide to applying for a mortgage.

Read on to learn more about the 10-step mortgage application process!

Pre-Qualification

The first step in the mortgage application process is pre-qualification.

During this step, you’ll be provided with a brief estimate of how much you’re entitled to borrow for a mortgage. You get this estimate by providing basic financial information, such as debt, income, and savings. The pre-qualification process can usually be done online or over the phone, free of charge.

Pre-Approval

The pre-approval process is much more thorough than pre-qualification. This is where the lender does a complete assessment of your financial situation. Most of the work for the application process is completed during the pre-approval, so you’ll save yourself lots of time later once you’ve found your new home.

You’ll have to submit various financial documents, such as:

  • Proof of employment, including two paystubs
  • Proof of bonuses, including T4s for the past two years on average
  • Debt (credit cards, car loans, student loans, and the minimum payments for each)
  • If you own a business, T1 Generals and Notice of Assessments from the past two years
  • Two to three months of bank and investment statements
  • 90-day down payment history
  • T4A’s

During the pre-approval process, you’ll find out what the maximum amount that you can borrow for a mortgage is. This, of course, happens after the lender has had a chance to completely review your credit report.

There may be restrictions to the agreement. For example, the lender needs to approve the property. But in most cases, the fact that you are pre-approved proves that your financial situation is strong enough to qualify for a mortgage.

Now, the hunt for a home can really begin!

Mortgage Application

Congratulations! You’ve found the home you were looking for all along. Now it’s time to formally apply for a mortgage. This application will ask you questions about your financial situation and the property you’re interested in.

You may have to provide the following information:

  • The amount you want to borrow
  • The type of home
  • The address of the home you intend to buy
  • The estimated value of the home (completed during a home evaluation)
  • The annual property taxes
  • The expected sale price

If you’ve been pre-approved, your financial documents and credit have already been reviewed. If not, you’ll need to provide that information now. Try to be accurate as possible during the application process to help avoid issues later on and risk delays, or even losing your dream home.

Processing

If the estimate is accepted, the lender may send a mortgage processer your application, financial documents, and credit report for review. A mortgage processor is a company that reviews your information and financial documents to ensure accuracy and that the house can legally be sold.

Any issues will be brought to light at this point in the application process. If you have missed payments on your other loans, you may need to provide an explanation in writing. If you have missed payments in the past, it may be wise to prepare for this.

The mortgage processor may also ask you to submit additional documents for the review. Sometimes this happens because of missing pages, various errors, or a government program requires a unique document.

Appraisal

An appraisal of the home will help determine the accurate value of the property. The lender will hire a professional appraiser for this step, as an expert opinion will provide the most accurate estimate of the home.

The appraiser will come to a conclusion based on the size of the house, size of the property, general condition of the home, location, and amenities. Within three days of the appraisal, you will receive an estimate and a report that clearly outlines how they came to the proposed value. If the appraisal comes in lower than what was agreed upon between you and the seller, you have the option to pay the difference and lender will give the loan based on appraised value.

If this is the case, you do have a few options. You could negotiate with the seller to lower the price, ask them to take out a second mortgage on the home to cover the difference or provide a larger down payment to cover the difference.

Underwriting

The lender will receive a report once the appraisal and review are complete. This report will help the lender to decide if they will approve or deny your loan or ask you for additional information or documents. The lender will approve your loan after unwriting if they are content with your application and review.

Closing Disclosure

You will receive a closing disclosure, which is sometimes called a Mortgage Commitment Letter, at least three business days prior to the closing date. This will provide you with enough time to compare the information in this document to the loan estimate. The information within the two documents is quite similar, although the closing disclosure is what they are offering you.

The closing disclosure will include information about the mortgage. including payments, term, rate and amortization, and any conditions need to be fulfilled at the lawyer’s office.

Insurance

Usually, a lender will ask for proof of home insurance. This is to help protect their investment, and honestly, you should have it either way. You’ll need to apply for insurance immediately after you’re approved for the loan or speak with your current insurance company about the new address.

The insurance company can provide you with an insurance binder, which is essentially temporary coverage that lasts for about 30 days. This happens in the case that the insurance company cannot complete your application before the closing date, due to time limitations. Once the binder is complete, your insurance should be ready to go.

Closing

You made it! It’s finally time to close.

The closing happens during an appointment where the buyer (you), seller, real estate agents, the title company representative, lender representative, and attorneys are present. You will all review the final documents for the sale and sign all forms to complete the transfer of funds. This is where you will pay your down payment and closing costs.

Make sure to have your identification, proof of insurance, and a cheque for the down payment and closing costs. In lieu of a cashier’s cheque, you can also arrange for a wire transfer to send the funds. Once the closing appointment is complete, you will get the keys to your new house.

Owning

Congratulations! You’re now a homeowner!

For more information about applying for a mortgage, having a home evaluation done, or just for some more information on local real estate agents, head over to our blog! We’re always up-to-date on all the latest trends and news in real estate.

If you’re looking for the best real estate agents in Hamilton, Waterdown or Burlington, get in touch with our experts at The Woolcott Team today.

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