Mortgage 101

You’re about to make something great.

Just like following a great family recipe, knowing the ingredients and steps to put it together makes the results that much better.

Mortgage 101 is a simple 5-step process to eliminate the confusion and guide you through the important aspects that relate to you and your mortgage approval.

     GO TO STEP 1

     GO TO STEP 2

     GO TO STEP 3

     GO TO STEP 4

     GO TO STEP 5


STEP 1: APPLICATION
Application, Survey, Documentation & Results

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⇒ COMPLETE MORTGAGE APPLICATION

The application provides me with the basic personal and financial client information needed for a lender to review.

MORTGAGE APPLICATION

⇒ MORTGAGE ASSESSMENT CLIENT SURVEY

The client snapshot provides supporting information to ensure Irene is sourcing the best mortgage solution for your risk appetite, financial plan and real estate objectives.

CLIENT SNAPSHOT

⇒ PROVIDE SUPPORTING DOCUMENTS

Along with the application and snap shot, we must verify income and down payment sources with proper documentation.

Documents are best emailed directly to Irene (irene@irenestrong.com) or an alternative delivery can be arranged if scan/email is not available.

REQUIRED DOCUMENTATION: Salaried/Hourly Employed


REQUIRED DOCUMENTATION
Salaried/Hourly Employed

Most recent T4

If commissioned, overtime pay, bonused or additional benefits such as car allowance, lenders will require most recent 2-years T4’s

Two Most recent Pay Stubs

Most recent Notice of Assessment (NOA)

Need to show no taxes owing. If taxes owed, must provide proof of outstanding taxes paid. Lender may request to have most recent 2-years NOA

Letter of Employment

Written on letterhead with contact details of Owner, Manager or HR representative. Must include title, tenure, salary, any overtime/bonus. Lender will call for verbal confirmation of employment.

NOTE: this can be provided just prior to
Lender Approval (Step 3)

 

REQUIRED DOCUMENTATION: Business Owners


REQUIRED DOCUMENTATION
Business Owner

2 most recent T1 Generals
including statement of business activities 

2 Most recent Notice of Assessments 
No taxes owing 

Need to show no taxes owing. If taxes owed, must provide proof of outstanding taxes paid.

Business License, if applicable

Articles of Incorporation, if applicable

NOTE:
Depending on the application results, it may be recommended to have some debts paid out to increase your mortgage affordability or to simplify and decrease monthly payments. Should debts need to be paid, lenders will want to see statement(s) of debts paid or the accounts showing a zero balance.

REQUIRED DOCUMENTATION: Down Payment


REQUIRED DOCUMENTATION
Down Payment

If Existing Equity &/or Property Sale:
Mortgage Statement

If Property Sale:
Contact of Purchase & Sale

If Property Sale:
Statement of Adjustments

If Property Sale:
Order to Pay

If Savings/Investments/RRSPs:
90 day Account Statement Records

If Gifted Funds:
Gift Letter

⇒ MORTGAGE ANALYSIS PREFORMED

A mortgage file is created and is used to determine client’s projected mortgage affordability.

⇒ CLIENT CONSULTATION

A client meeting (in-person or phone) is arranged to show results as well as discuss the expected closing costs.

Closing Costs Info Sheet

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STEP 2: SUBMISSION
Buy Based on your Budget

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⇒ MORTGAGE AFFORDABILIY

Clients are advised on their mortgage affordability.  As properties of interest are identified, providing the MLS listing number or property details will help to accurately project mortgage affordability and costs specific to that property.  Property taxes, maintenance fees and other factors can have a significant effect on the overall affordability from one property to the next.

⇒ FINANCIAL AND REAL ESTATE STRATEGIC TEAM

Building your real estate strategic team will help to streamline and simplify the purchase process.  These key partners will work for you and help to protect your investment:

Realtor

One of the most important investments you can make in real estate.  An all-star realtor can be the difference of investing well and building equity or investing poorly and loosing all your hard earned money.

Taking the time to find the right Realtor is important.  Finding someone trustworthy and knowledgeable of the local area will make a difference on your bottom line.  For example, a downtown Vancouver Realtor will know the ins and outs, pros and cons, of all the various condo buildings and developers.  A Realtor from Maple Ridge, although familiar with their housing market, may not be as educated on downtown Vancouver.  Unfamiliarity could come with some future surprising assessments, not only costing money, but a great deal of stress.

For a list of vetted Realtors I have personally interviewed, visit my Realtor Profile blog.  I recommend connecting with 2-4 Realtors to get a feel for their style of business before finalizing your decision.

Mortgage Broker

Mortgage brokers have access and knowledge of the entire mortgage market. With access to over 50 lenders, mortgage brokers will be able to negotiate and find great rates as well as have access to lender specials that may not be available on the open market.

They advise which lenders are right for you, whether it is straightforward or if there are special individual circumstances to address. In particular, self-employed, investors, adverse credit and clients with unique property purchases would find it advantageous to use a mortgage broker.

 

Solicitor (Lawyer or Notary)

A lawyer and notary provide the same services in a purchase or sale transaction:

  • Conduct a title search to confirm property is purchased from the rightful owner and is free of all charges and liens
  • Obtain tax information
  • Prepare the Statement of Adjustments detailing how much money needs to be transferred between the Buyer and the Seller
  • Prepare closing documents including the title transfer, mortgage, property transfer tax forms and forward them to the seller’s lawyer/notary for execution

Difference between a Lawyer and Notary Public

Lawyer

  • Can represent you in disputes and in court
  • Can provide legal advice
  • Carry professional liability insurance
  • Education: Law Degree and Law Society of BC admission program

Notary

  • Cannot represent you in disputes or in court
  • Focus only on non-contentious issues such as real estate, estate planning, and other documentation.  They only have the legal power to register and sign off on documents.
  • Carry professional liability insurance
  • Education: Undergraduate Degree and BC Notaries Course through University of British Columbia

Insurance Broker/Financial Planner

Purchasing a home will likely impact your financial position, and thus the coverage you need to protect you and your loved ones.

You will be presented with a few options for insurance coverage during the mortgage process:

1. Xeva Mortgage Insurance provider, Manulife Insurance

  • Mortgage Protection Plan includes two vital insurance products for mortgage protection: Life Insurance and Total Disability Insurance.
  • Mortgage is protected not just in the event of death, but also if a serious accident or illness leaves you unable to work.
  • Insurance pays off your mortgage balance in full if the insured borrower passes away.
  • Insurance is portable to any future mortgage.
  • Maximum coverage $1 Million.
  • No waiting period. Upon a completed claim, insurer takes over mortgage payments.
  • 60 ‘free look’ to review your coverage.

2. Lender Insurance 

  • Each lender will offer their own branded mortgage insurance option.
  • Many will note the cost on the mortgage commitment while others, such as the banks and credit unions, will present these options to you at your branch signing.
  • Terms, costs and maximum coverage will vary between lenders.
  • Insurance is not portable if the mortgage were to switch/transfer to a new lender.

3. Insurance Broker/Financial Planner.

Through an Insurance Broker, much like working with a Mortgage Broker, you would have access to a choice of plans from a number of different insurance companies. These plans could provide lump sum benefits that would not be tied specifically to paying off your mortgage.

Investigating insurance options early on is important. Many insurance plans can take 1-2 months to complete and for coverage to be initiated. In addition, by reviewing your financial picture, you may also find other investment opportunities to help you prepare for retirement or post secondary education savings.

Inspector

Inspectors preform detailed evaluations of all the building’s interior and exterior components and systems. They identify areas of deficiencies that represent a substantial investment or a danger to the dwelling’s occupants. They will note the probability of problems based on the current design and point out issues that will be difficult to maintain on an ongoing basis. Inspectors are trained to look for secondary signs indicating any issues, even if no visible signs are present.

Home Inspector Standards of Practice & Code of Ethics

 

Home Fire Insurance Contact

As part of your mortgage conditions, you will be required to have fire insurance arranged by the time your property closes. XEVA has a special partnership program with Schill Insurance should you wish to get a no obligation quote once a mortgage has been approved.  Other referrals are also available on the Real Estate Team Referrals list.

REAL ESTATE TEAM REFERRALS

⇒ OFFER TO PURHCASE

Once you have found your home, have your Realtor forward the property documents along with the contract of purchase and sale so that your file can be completed and ready for submission.

REQUIRED DOCUMENTATION: Property

 


REQUIRED DOCUMENTATION
Property

Contract of Purchase and Sale

MLS Listing

Property Disclosure Statement
(PDS)

Strata Form B
(if strata property)

Additional documents may be requested by the lender for clarification or for more exploratory investigation.  Other documents requests can include AGM and strata meeting minutes, depreciation reports, other building reports, etc.

If the down payment is less than 20% of the purchase value, the property will have to be approval by one of the mortgage insurance companies (CMHCGenworth or Canada Guaranty) and a premium will be applied to your mortgage. They may require an appraisal on the property to verify the value, but typically they are able to complete an auto-valuation.

If the down payment is greater than 20%, then the lender has a greater discretion on the property approval.  However, since it may not be insured, the lender will usually require an appraisal unless the loan-to-value is high enough to support their in-house valuation.

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STEP 3: COMMITMENT
Submit for a Mortgage Commitment

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 ⇒ CLIENT FILE & DOCUMENTS SUBMITTED FOR LENDER APPROVAL

Completed file is submitted to lender with supporting income, down payment and property documents. Lender underwrites file and will typically respond within 1-7 days from submission.  Response times are dependent on current market conditions.

⇒ APPROVAL

An approval will be sent outlining terms and conditions of the mortgage. Additional documents may be requested as well as the signing of the commitment, Pre-Authorized Deposit (PAD) form, VOID cheque, ID and providing Solicitors contact details.

NOTE: Solicitors must meet the lender approval list.  Lenders will require Solicitors name, Law Office/Company name, and complete contact details.

Approval of the income, down payment and property documents are the most important for subject removal. 

⇒ COMPLIANCE

There are three compliance documents requiring signatures and dates to complete the file:

1. MPP Insurance Quote: clients are provided with an in-house insurance option (Manulife Life and Disability Mortgage Insurance) that must be accepted or declined.
2. BC Disclosure: advising clients of the cost of borrowing including interest costs, legals, and any required fees such as title insurance.
3. Form 10: To address the brokers interest, if any, in the property and inform the borrowers on how the commissions are to be paid, usually directly from the lender.

⇒ INSTRUCTIONS TO SOLICITORS

Once all conditions have been approved by the lender, the file will be instructed to the solicitors office for official signing.

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STEP 4: INSTRUCTED
Meet Solicitor to Finalize Purchase

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⇒ ONE OR TWO APPOINTMENTS

The solicitor signing finalizes the purchase and title is transferred. Depending on the mortgage lender, the signing will be complete in one or two step steps:

ONE STEP: Monoline & Private Lenders

– Only require the signing with the solicitor

TWO STEPS: Credit Unions & Chartered banks

– Require a branch signing prior to the solicitor signing
– In addition to document signing, the meeting is typically an opportunity for the branch to cross-sell on other banking product lines such as lines of credit, credit cards and insurance.

⇒ TIMING OF MEETING

A meeting with your solicitor should be set up at least 3 days before closing.  Preferably about a week before closing is best.  This allows time should any issues arise as well as provide the time for transfer of funds. Note, market conditions can dictate the timing and availability of solicitors, so more time is not always an option.

⇒ STATEMENT OF ADJUSTMENTS

The solicitor should provide a Statement of Adjustments prior to your meeting and will advise on how much, if any, additional funds will be required to complete your purchase. The Statement of Adjustments includes the deposits made, mortgage proceeds from the lender and for the costs associated with any fees, Property Transfer Tax, property tax and strata fees adjusted between the seller and buyer, based on the adjustment date.  If outstanding funds are owed, these are provided by the buyer by way of a bank draft in trust to their solicitor.

⇒ TITLE TRANSFER

The solicitor will provide you with your signed mortgage documents and title transfer of ownership.

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STEP 5: POSSESSION
Closing and Mortgage Management

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⇒ PAYMENTS BEGIN

Following possession, the lender typically sends out a welcome package and mortgage overview.  If the lender has a client online portal, those details will also be made available so you can manage your mortgage online.

⇒ UPDATES

Important updates will be noted throughout the year including Bank of Canada overnight rate announcements and important property reminders such as property tax reminders and homeowner grant deadlines.

⇒ MORTGAGE IS MONITORED ON AN ANNUAL BASIS

An quick annual mortgage review is done on each mortgage anniversary to ensure client’s are maximizing their mortgage savings.

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