I’d like to know exactly what is involved in getting a mortgage, for a home I wish to buy.  

Step 1: Pre-Approval

When you decide you’ve reached a point in yoru life when you want to purchase a home, I do recommend obtaining a mortgage pre-approval.

This pre-approval will tell you how much of a mortgage you qualify for, so you can then start looking at homes that fall into your approved budget and price range.

Mortgage pre-approvals can be obtained fairly quickly (within 48-72 hours, depending on complexity, your personal financial situation, and other factors we will determine). quickly and easily. Please click here to apply now.

Step 2: House Hunting

Now that you’ve obtained your mortgage pre-approval, you and your real estate agent can begin researching available properties that fit your approved price range.

Step 3: Placing an Offer 

Once you’ve found the home you are interested in, your real estate agent will help you to submit an offer on the desired property. Normally, all realtors will create a Purchase and Sale Agreement conditional on obtaining financing.
(What this means is your realtor will add a clause in your Purchase and Sale agreement noting your offer is “subject to financing,” which means you are requesting sufficient time to complete your financing details, before finalizing your offer.

Your real estate agent may include additional clauses such as “subject to a satisfactory home inspection,” “appraisal,” or “subject to review of the condo documents.”

If your offer is accepted and signed by the seller, you will need to provide a copy of the purchase agreement to yoru mortgage broker, hopefully ME, so I can start the work I need to do, to complete your lending file.

Step 4: Lender, Insurer, Appraisal

This is where I start my work on your behalf. Once you make an offer on your desired home, you are normally provided sufficient time to complete your financing details and arrange for a property inspection (and deal with any other conditions you have put in your offer). This is called the “condition period”. The norm time frame for this period tends to be 7-10 days to complete your conditions. At the time of your offer, you will give an initial deposit on the property (this amount will be negotiated between you, your real estate agent, and the seller). It is important to be sure your downpayment funds are easily accessible (savings or chequing account), or similar accessible cash. If your downpayment funds are being obtaoned through your RRSP savings or similar, there are several extra days required to cash out these funds, so we will discuss the source of your funding at the time of your mortgage pre-approval. 

During the “condition period” I submit your lending application to my group of lenders (different lenders will be applicable for different type of borrowers), and I will work with any required insurer (if you have a high ratio mortgage – with less than 20% downpayment) – we must use a mortagge default insurer such as C.M.H.C. , an appraiser or property inspector, and other required parties to ensure your approval is completed in a timely and efficient manner.

Once received, the lending institution sends your information to the default insurer (CMHC, or similar, if applicable). The default insurer underwrites your file and either conditionally approves it, oe requests additional information and/or modifications to the deal, or declines the file.

If your down payment is 20% or more, you will usually require a property appraisal. I may require additional documentation depending on the specifics of your file. You will need to collect the requested paperwork and submit it to me in a timely manner so the underwriter has a chance to review and approve your documentation.

If approved, your lender will ask me to forward all supporting documentation to them (proof of income, source of down payment and such). The lender will then review the documents to ensure that the information contained in your application was accurate.

Once your documents have been reviewed and approved, and we have met to sign your mortgage documents, the lender will send me an email explaining that your financing conditions have been met, which I send to you so you can advise the realtor that they can remove the conditions on your offer. 

Step 5: Firm Sale

Once you have met all of your financing conditions, your real estate agent will remove the “subject to financing” condition from your Purchase and Sale contract. You may remove other conditions at the same time (if they have been met), such as “subject to a satisfactory home inspection.”

Once all of the conditions are satisfied, you have a “firm sale”. A firm sale means that you have unconditionally purchased the property. The lender will begin to prepare mortgage instructions (paperwork) and, once completed, they will be sent to your lawyer’s office. If you do not have a lawyer, we can suggest a reputable lawyer that handles real estate transactions. 

At this stage, all your conditions have been met, and you await yoru “closing date” which is the date when you will take possession of your new home. 

Step 6: Moving Details

Your lawyer will receive and prepare your mortgage documents. Use this time to start preparing to move into your new home! Exciting!! 

Step 7: Meeting with your Lawyer

Your lawyer will contact you to arrange for a time and date for you to visit their office to sign the mortgage and legal documents. Approximately one week before your possession, you will meet with your lawyer to sign additional paperwork and, at this time, you will bring your lawyer a money order/certified cheque for the balance of your down payment (your down payment minus any deposits you have already given to the seller) as well as your legal fees. Your lawyer will advise you of the exact amount of the draft required, so you never have any surprises. 

Step 8: Possession

The tiem has arrived to move into your new home! While there is a lot of work invokved in moving, it’s an exciting time too! The funds will be transferred from your lawyer’s office to the seller’s lawyer’s office and the property is transferred to your name.

Step 9: First Mortgage Payment

Unlike with rent, which is paid at the beginning of the month, you make your mortgage payment at the end of the month, or any set date that work with yoru payroll. (We can discuss payment options, many people take advantage of accelerated bi-weekly payments to reduce your mortgage balance faster – ask me about this option).

For example, if the purchase of your home was completed on June 1, and you chose monthly payments, you will not have a mortgage payment until July 1. Please feel free to ask me about different mortage repayment options available to you.

Once finalized, you will receive the details of the mortgage repayment from your mortgage lender.

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Your Support Team

 When you purchase your home, there are a number of key players who will help you throughout the process.

Your REALTOR®

Your REALTOR® is your partner in the home buying process. Once your REALTOR® understands what type of home you are looking for, he or she will begin researching the market on your behalf. The REALTOR® will search available properties for sale and will show you the ones in your price range that meet your criteria. Once you have found the home you are interested in, your REALTOR® will prepare an offer and represent you in the negotiation process.

Generally, you do not pay a fee to the REALTOR® who represents you when you are buying a home.  The REALTOR® is paid by the seller of the home. Real Estate Agents are licensed through provincial bodies and are knowledgeable about the markets they work in.

Your Mortgage Broker (That’s me!) 

I will take time to understand your financial needs and will research the market to find a suitable mortgage product for you. As your Mortgage Broker, I will represent you to the lenders, process your file, submit your documentation to the financial institution as well as ensure the process goes smoothly and that your approval is completed within the deadline agreed to on your offer to purchase. There are no fees to have me act as your Mortgage Broker, as I am paid by the lending institution. 

Great Reasons to use me as your Mortgage Broker
• I have access to different lenders, banks, trust companies, investors, and financial institutions. 
• Fast credit and loan pre-approvals with no cost or obligation. (Some conditions may apply)
• I’m an expert at matching you with the best-suited mortgage. 
• Get mortgage rates at wholesale, guaranteed up to 120 days. 
• Because mortgage brokering if my full-time occupation, I’m up-to-date on mortgage rates, terms, and pre-payment options available on the market. 
• I only specialize in mortgages and am knowledgeable on current market trends. 
• The Mortgage Brokering industry increases competition in the marketplace, thus keeping rates low. 
• I save you time and money. And, we all know, time IS money!
• I have a vested interest in satisfying your needs since my business relies heavily on referrals and repeat business. 

Lender

I will work with you to choose a suitable mortgage lender. The majority of your contact with the lender will be after your mortgage funds as I will be your main point of contact throughout the mortgage process. 

Insurer

Mortgage loan insurance is required by lenders when homebuyers make a down payment of less than 20% of the purchase price. Mortgage loan insurance helps protect lenders against mortgage default and enables consumers to purchase homes with little or no down payment — with interest rates comparable to those with a 20% down payment. As with any insurance, there are insurance premiums to be paid. The amount of the premium varies and can range between 0.60% and 4.00% depending upon how much of the purchase price/home value is financed with a mortgage loan (Mortgage insurance premiums are higher for self-employed individuals or rental properties). There are currently three mortgage default insurers in Canada: CMHC, Sagen (formerly Genworth), and Canada Guaranty. 

Please note, Mortgage loan insurance is not to be confused with mortgage life or disability insurance which guarantees that your remaining mortgage at the time of your death will not be a burden to your estate or that your mortgage payment will continue to be paid should you become disabled. 

Appraiser

The appraiser’s role is to provide the lender with a market value of the home. The market value is the price at which the home would sell with reasonable exposure on the market to a large number of buyers. Your Mortgage Broker will arrange the appraisal for you. The cost of an appraisal is approximately $300 and is required if your mortgage is conventional (you have a down payment of 20% or more and the mortgage is not insured through CMHC or Genworth). The appraisal cost is the responsibility of the borrower.  

Home Inspector

A home inspector provides you with information on the construction of your home. The inspector will inform you of any repairs that need to be done in the near future, and will let you know what types of repairs you can expect in the next few years. Your REALTOR® can provide you with some names of quality home inspectors. The cost of the home inspection is the responsibility of the purchaser.

Lawyer

Your lawyer (or notary) will transfer the property to your name and will draw up and register the mortgage documents. Your lawyer liaises with your lender and REALTOR® to ensure they have all of the required paperwork to process the sale. As your Mortgage Broker, I have contacts with several lawyers throughout the Edmonton area and can refer you to a lawyer if you do not have one. The cost of legal fees are the responsibility of the purchaser.

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Documentation Required

In order to process your mortgage, mortgage brokers require documentation to support your mortgage application.

You can print off our Mortgage Documentation Checklist – here: DOCUMENT CHECKLIST

Please note that there may be other conditions not listed here that may also be required. 

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Proof of Income

You will need to provide the following documents for proof of income:

Employees:

-Employment confirmation letter: this is a letter written by your employer (usually the human resources department or direct supervisor) confirming your position, salary amount (or hourly wage and guaranteed number of hours worked per week) and length of employment with the company. It must also have a signature from the individual who wrote the letter as well as the individual’s contact information.

-A current paystub (dated within the last 30 days).

-Your last two years’ Notice of Assessments.

Commissioned or self-employed:

-Your last two years T1 Generals (the T1 General or T1 is the form used in Canada by individuals to file their personal income tax returns. Your tax preparer provides you with a copy of your T1 Generals when you file your tax return).

-Your last two years of Notices of Assessments.

Down Payment Verification

You will need to provide the following documents to confirm the source of your down payment: 

-If your down payment is from savings in your bank account, provide three months of bank statements showing an accumulation of the down payment funds. The statements must state your account number and name.

-If your down payment is from investments (RSP, GIC, stocks, bonds), provide a copy of a recent account statement.

-If your down payment is a gift, a “gift letter” is required together with proof that the funds have been deposited into your bank account. I will provide you with a blank gift letter for you to fill out.

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Estimates of Closing Costs

In addition to your down payment, there are other costs involved when purchasing your first home. They include, but are not limited to:

1. Legal Fees   

A lawyer or notary will be necessary to complete the home buying process. Your lawyer will prepare the mortgage documents, have you sign the documents, and will transfer the property to your name. (Lawyer’s closing cost assistance fee: roughly $1,000 to $1,500) 

2. Appraisal Fees

If required, an accredited appraiser will visit the home to determine if the price you have offered is what the home is worth. The appraiser will compare recent sales of similar properties to determine the estimated value of your home. He or she will provide a report to your lender that confirms the value. (Roughly $300)

3. Property Tax Adjustment 

You may have to pay some of your annual property taxes at the time of closing. This would be done when you sign at the lawyer’s office. Because every situation is different, we suggest confirming this amount with your lawyer.

4. Interest Adjustment

Depending on the type of payment frequency you have chosen, your payment will be set to be deducted from your specificed bank accunt on a specific day, normally 1 month or 2 weeks after you have signed your documents. However, to ensure your payment is deducted on specifially the day you wish, you may have to make an interest adjustment payment.

If you home purchase closes on July 1st (a Monday), but your payroll and the date you want your first payment to come out falls on a Friday, 1 week later, you will have to pay for 5 days of interest on your mortgage (July 1, to July 5). Your lawyer will be able to advise you exactly what this amunt will be, before yoru first payment (the interest adjustment) will be. 

5. Title Insurance       

Title insurance is sometimes used instead of a Real Property Report (referred to as an RPR), and may be requested by your Mortgage Broker, lender, or lawyer. Your Mortgage Broker, lender, or lawyer will discuss title insurance with you if it is applicable for your transaction. The rough estimated cost of title insurance is between $200-$300.

6. Fire Insurance

Fire insurance ensures you have adequate coverage to pay off your mortgage in the case of fire. Your lawyer will ask for proof that there is fire insurance in place when you go in to sign the papers at their office. Ask your mortgage broker for a referral to an insurance agent who will be able to assist you if you do not have an insurance company.

7. High Ratio Insurance Premium

When borrowers have less than 20% of the value of the property as a down payment, they must pay a mortgage insurance premium. The premium varies, depending on the size of your down payment or whether or not you are self-employed, so you should check the amount with your Mortgage Broker. Most people will add this premium to their mortgage. You also have the option of paying this amount separately and upfront (this helps you avoid paying interest on this amount – we can discuss this in more detail).

8. Home Inspection

A home inspector will look through your home and provide you with his or her professional opinion on the construction of the home. The home inspector will advise of any maintenance required and will let you know what kind of maintenance you can expect in the next few years. I have access to numerous property inspectors who can complete a full property inspection for you that will suffice your lender’s requirements.            

9. Survey/Real Property Report (RPR)        

Most financial institutions require surveys. Surveys confirm where the home is sitting on the lot and make the lender aware of anything unusual about the property. You may be able to get an acceptable copy of the survey from the previous owners and save the survey fee. Title insurance can sometimes be provided in lieu of an RPR

10. Utilities Connection Charges        

Some utilities charge a move or connection fee. You will need to contact each utility provider to find out their charge.

Purchasing a new home is a very exciting (and stressful) time! Take your time to find the perfect property for your lifestyle and ensure you have the right professionals in place to ensure a smooth transaction.

My role is to provide you detailed, comprehensive guidance throughout the mortgage process along with your realtor your lawyer and any other professionals you may need to consult throughout this period prior to becoming a homeowner. If you have any questions in regards to mortgage financing, need a pre-approval, or just need some information please contact me anytime!

Sincerely,
Janet Hong