This is the fourth and final segment in this series about Homeownership - Learning about the mortgage end! This series provides a general overview of mortgages with some of the pro and cons related to certain aspects. There has been a lot of information included here, with some areas a little more in depth than others. However, as stated throughout these postings, it is emphasized that you should talk to a mortgage professional for further explanations and for proper guidance working through the details.
In this final segment we will review a general flow of activity and information for the actual mortgage process. From your initial contact to the final closing of your mortgage, we will cover the general steps, the basic documentation requirements, and the estimated costs.STEPS IN THE PROCESS
Choosing a mortgage professional
- As reviewed in segment (1) about Sources Of Information, there is a lot to consider when finding the right person to help you with this process but first and foremost is to be comfortable with your choice. Are they recommended by clients, friends, relatives? What experience do they have? Are they available at times that work for you? Do they have multiple options to offer and are they prepared to review the pros and cons as well as provide qualified recommendations?Initial meeting and application
- This will be scheduled at a time convenient for all parties looking to obtain the mortgage. Your mortgage professional should be flexible enough with their schedule to accommodate you. Allow about 1 hour for this meeting as you need to complete a mortgage application and have your credit report reviewed as well as cover the options available for you. This will lay the ground work to qualify you for the right mortgage. If you are buying, it will give you an idea of the price range of property you may consider. If you are refinancing, it will provide an idea of the amount of funds that may be available. From this point, you should be able to make a decision if you will move forward and be able to determine the remaining steps in the process. There will differences between buying and refinancing.Obtaining the approval
- Once the decision to go forward on a specific deal is made, your mortgage agent will arrange for the lender or lenders to provide a decision on your application. The time involved may be up to 48 hours to obtain a decision. Additional time is occasionally needed in some cases and your mortgage agent should keep you updated regarding the status. Once a decision is made there will be a requirement of satisfying certain conditions or the approval can be withdrawn. Some of these conditions may include documentation that is needed with all mortgages and may have been provided during the initial meeting. (If this is only a pre-approval, it will allow you to shop for your new home with confidence. The conditions will be determined on the final Approval.Accepting the approval/conditions -
Once you have your approval in place you will need to accept this approval, subject to any conditions required with the decision. This can be done by signing the mortgage approval and providing documentation to satisfy the conditions of the approval. Your mortgage agent will review all the details and work with you to get these conditions satisfied and submitted to the lender. Once this step is completed, the lender will send instructions to your chosen lawyer to complete the transaction for the terms and dates indicated in the approval. If some items on the approval are not satisfactory to you, your mortgage agent will try to work with the lender for adjustments to the conditions where possible. If the final approval is still not satisfactory, you may choose to cancel the process at this point with no obligations.Additional signatures/meetings
- Some lenders require a personal face to face meeting with one of their local representatives. This would be scheduled with you by the lender directly. Also, if there are changes to the accepted approval for any reason, you may be required to resign for these changes.Lawyers meeting and closing
- Once all conditions are satisfied and your lawyer has completed their preliminary tasks, they will request a meeting to sign the formal mortgage contract and review all the details with you again. They will also advise you regarding your legal responsibilities and the final costs of the mortgage as well as handle the disbursement of the mortgage funds. They will advise you prior to the meeting about the funds, if any, you will need to pay to them to complete the transaction. If you are buying, this meeting will likely be a day or so before the final closing date.INFORMATION AND DOCUMENTATION
In order for you to go through the mortgage process and have access to the mortgage funds at the end, you will be required to provide certain information and documentation to your mortgage professional, your lender and your lawyer. Some of this information is common through most cases but there will also be items required that is specific to your application. Here is a general review that should help you prepare for your venture into a mortgage.General personal information
- During your application meeting you will need to provide details as requested by the mortgage agent regarding your basic information, including but not limited to, your full name,age, address history, contact information, employment history, assets, liabilities, plus other demographic information and your permission to review your credit report.Lawyer details
- You will be asked for the name and contact information of the lawyer that is acting on your behalf for the mortgage transaction. If you do not have a lawyer, you may ask for recommendations from family friends, co-workers, your realtor or your mortgage professional. Many will have either used or had a working connection with a lawyer they may suggest. You should also do your own research to help make your own decision for the lawyer you will use. You should consider their reputation and their service as well as their cost estimates. This information will be needed early in the process to allow the lender to pass on the instructions concerning your mortgage to your lawyer.Employment/Income confirmation
- In all cases you will need to provide acceptable confirmation of your employment and income as part of the approval conditions of your mortgage. The will normally include a current pay stub and letter from your employer but it may also require additional pay stubs, plus T4 slips or Notice of Assessments (Canada Revenue Agency notice of the results of your tax return review) for the past 1-3 years. In some cases it may even require your full tax returns for the past 1-3 years. It is a good idea to bring along your pay stub and T4 slips or Notice of Assessments at the initial meeting to ensure you receive the best benefits from the application process.Down payment and closing costs
- For purchases, you will be required to show proof that you have the funds to cover any down payment (5% of the purchase price is minimum) and closing costs (1.5% of the purchase is minimum) involved in the process. You will be required to confirm these funds by way of 90 days transaction history of accounts that may hold these funds. if you have not had the funds for at least 90 days or they come from any source (such as a family gift) outside your personal funds, additional documentation will be required and approved.Identification
- In all cases you will be required to provide adequate identification to your mortgage professional, your lender and your lawyer as requested.Additional documentation
- On a case by case basis there may be requirements for further conditions such as documentation of existing mortgages, payout of certain debts, an appraisal report or other items as required on your specific mortgage approval.COSTS
With any mortgage there are certain associated costs. This is meant as an overview and you should take it upon yourself to question this area thoroughly at all levels to ensure there are no unexpected expenses. Although most mortgage professionals do not charge any fees to process your mortgage, there may be some who may charge for certain types of applications or a fee may be added into your mortgage at the lender level. You should be informed fully about any such fees.
The main cost related to mortgages are connected to the closing costs (approximately 1.5% of the purchase price). This is usually paid to your lawyer to cover the registration of your deed and the registration of your mortgage with the provincial registry system, plus the lawyers fee and other directs expenses (such as title history search, legal judgment search, administration and other out of pocket items) that are required in the handling of your mortgage transaction.
In addition, an appraisal report may be required in certain situations which would likely range in cost from $400 to $600. These are not requested as a standard item as it is based on individual situations only.SUMMARY
It has been a pleasure to pass on to you an informative group of posts that will help you be more prepared for the venture into the mortgage process. Please keep in mind that, although this series has a great deal of information, it is not all inclusive and it does not apply to every case.
The MOST IMPORTANT
thing that you should take from this series on the mortgage side of homeownership is that BEING INFORMED
is the only way to ensure getting the best deal and service that your personal situation will allow.
I am a mortgage professional with Centum Superior Mortgages in St. John's, NL with 35 years experience in the lending industry and I hope you benefit from my efforts in posting this information.
Please email me your comments to firstname.lastname@example.org