- Hey welcome back.
It's Nolan Matthias from Mortgage360.
If you've been following along
to our First Time Homebuyer series,
you know that we've talked about all things buying a home.
Like saving for a down payment,
getting preapproved for a mortgage,
finding the right realtor, how to write a contract.
And in today's video, the fifth part of our series
on first time homebuyers, we're going to talk about
how to get approved for a mortgage
and the step by step process.
Now just because this is a first time homebuyers series,
I don't think you need to get scared away
if you are not a first time homebuyer,
this stuff all applies to everyone.
But it is obviously targeted to first time homebuyer.
So we're gonna go through the basics
in a step by step process.
But before we get into it, do me that favor,
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Hey, and while you're here, feel free
to ask your questions.
Your mortgage related questions,
your real estate related questions,
your housing in general questions,
feel free to put them in the comment section below,
and we'll answer them almost immediately.
As fast as you can ask them, we'll get to 'em.
Okay, so obviously, we've done all the hard work,
we've saved the downpayment,
we've gotten the preapproval, we found our realtor,
and we've written the contract, that's all the hard stuff.
And if your preapproval was done properly,
then this next step, which is the actual approval process
should be pretty simple and straightforward.
In fact, it should almost all be done for you
by the time you get to this stage.
But we're gonna go through it in detail step by step.
And usually what happens is when we do
a mortgage application for somebody
we send an email with all of these steps
that take place in the process.
In fact, we call it our simple steps email.
And basically what it does is it outlines
the steps of getting a mortgage.
So all mortgages start in the same place,
and that's with an application.
And you can either get an application to be preapproved,
or you can get an application to be approved
if you've already bought a house.
And once you fill out the application,
then you'll go about collecting documents.
Now, if you've already written an offer,
and you haven't provided documents yet,
this is a time is of the essence scenario.
because you basically have five to 10 business days
for your financing condition in order to get
your entire mortgage approved.
So that means that you need to get documents in fast,
so that your mortgage broker can review them,
send them to the lender, have them reviewed,
and make sure that there's no issues.
The documents that you're gonna need are pretty simple.
If you're employed, you need a job letter,
states how long you've been at your job,
what your title is, and your salary.
You'll also need a pay stub and then proof
of where your down payment came from.
If you're self employed, you're gonna
need a little bit more documentation,
most of your tax documents, so your T1 Generals,
any T4s or T5s that you've issued yourself,
and then your notice of assessment from Revenue Canada.
Once you've gathered up all those documents,
you'll send them over to your mortgage broker
along with your purchase contract
and the listing details for the property that you bought.
Then the mortgage broker will do their mortgage magic,
put it all in the system, help you select the lender,
and then submit it to the lender.
Now, the part about selecting the lender
is interesting because there's gonna
be different ways that it's done.
In the cases where you go to a bank mortgage specialist,
they're pretty much just gonna say,
"Okay, well, we're BMO.
So we've got one set of products, here they are.
You can either choose variable fixed,
and then if you choose fixed,
it's gonna be, do you want a short term
or long term mortgage."
It's gonna be very, very simple.
And they're pretty much going to dictate
the product features by the fact that
you're sitting at the BMO Desk and not somewhere else.
And the features that they have
are the features that they have.
Now, if you're dealing with some mortgage brokers,
what they will do is they'll take a look
at your application and they will go,
"Okay, I think your mortgage best fits at this place."
And they'll tell you why, they'll explain it to you.
And once you give them the go ahead,
hopefully you get them the go ahead,
'cause sometimes they don't actually ask for the go ahead,
they just submit it, and then come back to you
with a commitment letter without talking
about your lender at all.
But hopefully what they do is they have that conversation
and they say, "Here's where we recommend
that you send your mortgage."
And they'll submit it there
and that will start the approval process.
Now for brokerages like ours that
are a little bit more consultative,
what we'll do is we'll take the information
that you've provided, along with
some suitability questions that you have answered.
Things like, if you're ever going to move.
If you feel like you wanna
be able to pay down the mortgage faster.
If you wanna be able to get a lower rate
during the middle of the term and be able
to pay your mortgage and move to a different lender.
Questions like that are things that we'll ask
and then what we'll do is we'll get
two to three recommendations.
Typically what we'll do is, we'll tell you
about the best discount mortgage you can get,
then we'll tell you about
the best bank mortgage that you can get.
And then what we'll do is we'll make recommendations
on which mortgage we think is most suitable for you.
And in my opinion, that is the way
that most brokers should operate.
It is the best way to operate that
is in the benefit of the client, which is you.
So then once you've selected your lender
in consultation with your mortgage broker,
and you've selected your product,
whether it's a variable or a fixed,
they'll submit it to the lender and it will go
into their underwriting queue at that lender.
And then what will eventually happen is
when it's picked up for underwriting,
the underwriter will go through it,
look at your credit, they'll look at the property,
they'll look at your income, and they'll see
if it's a deal that they wanna approve.
Now if your mortgage isn't insured mortgage,
then there'll be another step in the process
which is sending it to the insurer for the insurer approval.
Now this is the only time that an insurer
will ever see your deal.
Insurers don't do preapprovals.
So this will be the first time that they've seen your deal
and ultimately the insurers have the final say.
So if they're willing to insure your mortgage,
they'll issue an insurance certificate number
back to your lender.
Then your lender can go through the process
of actually approving your mortgage.
Now, if you're putting more than 20% down
and the mortgage isn't insured, then you don't
have to worry about that step in the process,
the lender gets to make the decision
by themselves whether or not they're
going to approve you.
Now, regardless of whether it's insured or not,
once the lender approves you, then what
they will do is they will issue
what's called a commitment letter.
And the commitment letter details,
the mortgage that they're offering you.
It will have things like the amortization,
the rate, the total mortgage amount, insurance premiums,
if they happen to be there,
the taxes that you will pay,
and whether or not you will pay them through the lender
or through the municipality,
and all the details of the mortgage.
They'll also have their standard conditions,
as well as the conditions that you need to meet
in order to get full approval for that mortgage.
And that will be where the documents
that you provided come into play,
because those things will be reviewed,
sometimes by the underwriter,
sometimes by a document fulfillment person.
And if they're acceptable to the lender,
then the lender will sign off
on the conditions of your approval.
Now, once they've signed off on the conditions
of your approval, and you've reviewed
the commitment letter, you sign
the non-binding commitment letter,
in order to agree that you would like
to take on that mortgage, now you still
can choose to take a different mortgage.
You can still choose to go to a different lender,
most commitment letters aren't binding,
there's nothing in them that says
that you have to take the mortgage.
But signing the commitment letter will issue
what's called the mortgage instructions to your lawyer.
And what that basically is is the lender saying
to the lawyer, here's the details of
what we've agreed to with the client,
please create a mortgage document
for these details is to be signed by the client
and then registered against the title of the property.
At this point, if you've met all the conditions
of the lender, and the lender is happy
with all of your documents, then you can
go ahead and remove your financing condition,
which will be done by talking to your realtor
and it's basically saying, "Hey, I've got my mortgage done,
it's ready to go."
And we can go ahead and remove that financing condition.
At this point, you bought the house.
Congratulations!
Now at this point, it's pretty much time to sit back
and relax until such time
as you go to sign your lawyers documents.
Now one thing to consider here is that
if there's a period of time, an extended period
of time between when you waive
your financing conditions and get your approval,
and when your closing date is,
let's say it's 30 days or a couple of months,
what you're gonna wanna do is make sure that your broker
or yourself is watching interest rates,
because if interest rates go down,
then you wanna make sure that it's requested
from the lender that you can have the lower rate.
Now some lenders allow the broker to do this once,
some lenders allow the broker to do this indefinitely.
First national, the lender that we use the most,
pretty much allows us to request rate drops
as often as rates actually drop.
In fact, today, the morning before I recorded this video,
we had a client who was sitting in his lawyer's office,
we noticed that his rate could be a little bit lower
and requested that first national reinstruct
the mortgage with the lower interest rates,
so that that client could save a little bit more money.
But you wanna make sure regardless that
you are paying attention to this and that your broker
is also paying attention to this.
And it's a good idea to set a reminder
in your iPhone or your Samsung or whatever you use,
to call the broker about seven to 10 days prior
to your closing date and just make sure that
there isn't any lower rates available.
Now as your closing date approaches,
which is the day that you'll take possession
of the property, your lawyer will go to work,
they'll get the instructions from the lender,
they will calculate the purchase price less
the amount of mortgage that you're getting,
which will be your down payment,
they'll subtract the deposits from that.
And then the lawyer will add their legal fees
and any other costs associated
with getting the mortgage registered.
And that will give you an amount that you need to bring
into the lawyers office for your downpayment.
Now, one point of confusion is people often think
that the down payment goes to the mortgage broker.
We do not handle your money,
we don't wanna handle your money,
the bank doesn't wanna handle your money,
if you're processing a real estate transaction.
It is the lawyer that handles the money.
So where you take your downpayment check to
will be to the lawyer so that they can
in combination with the mortgage, combine it,
take their fees off, take any real estate fees off
and send it to the seller.
And that will ultimately close your transaction
and allow the title to transfer
from the previous owner to yourself.
So that's essentially the mortgage process
in a nutshell, start to finish.
Again, if your preapproval was done
in advance and documents were asked for
they should be fairly straightforward.
If not, it could end up being
the most stressful week of your year.
But regardless of which it is.
The good news is if everything is done correctly
at the end of the week or the end
of the 10 days it takes
to typically do this process.
You'll be told, "Congratulations.
You've been approved for the mortgage.
All the conditions have been met.
And you now have bought a home."
Congratulations.