Everything You Need to Know About Obtaining a Mortgage
After you’ve found your dream home and had your offer accepted, it may feel like it’s all downhill from here, but in reality, you still have a long road until closing.
From getting approved for a mortgage to filling out paperwork and everything in between, we will explain every step involved in the mortgage process so you can be better prepared for what’s to come.
Timeline of Events During the Mortgage Process
Meet With a Broker to Determine How Much You Can Afford
Before you start seriously looking at homes, you should book a meeting with a mortgage broker. Now, you might be wondering, why is this necessary so early on in the home buying process?
Along with your realtor, a mortgage broker should be a crucial part of your team throughout this process. A broker can sit down with you early on and help you determine what price range you should be looking at based on your debts, income, etc. This ensures that you don’t end up putting in offers on any homes that lenders may not approve you for.
Once you have established what your budget is, your mortgage broker will most likely recommend that you obtain pre-approval before you put any offers in.
Getting pre-approved for a mortgage is a crucial first step that can help you significantly when you are ready to start putting in offers on homes.
Essentially, pre-approval is written confirmation from a lender that you are likely to be approved for a mortgage of a certain amount. While this does not count as actual approval for a mortgage, having pre-approval can give you, and sellers, peace of mind that you will most likely not have to back out of a sale due to financing issues.
In order to obtain pre-approval, you’ll need to provide the following to your mortgage broker:
- Letter of employment
- Pay stubs
- Tax information
- List of assets
- Social Insurance Number
- Consent to a credit check
- And more
Once you’ve obtained pre-approval and have a solid idea of what you’re likely to be approved for, you can move on to the most exciting part of the process – house hunting!
It’s important to remember that in hot housing markets, a home’s listing price is often a starting point, and what it will actually sell for may increase significantly depending on competition.
If you are considering putting in an offer that is higher than what you have been pre-approved for, be sure to consult with your mortgage broker before your realtor submits any paperwork.
Put in an Offer
You’ve found the perfect home and are ready to put in an offer. This process will be handled by your realtor and could go one of three ways:
- Your offer is accepted
- Your offer is rejected
- You are asked to submit a counter-offer
After an offer is accepted, your realtor will be in contact with your mortgage broker to provide all the details of the offer so your broker can proceed with applying for a mortgage on your behalf.
Provide Outstanding Personal and Financial Information to Your Broker
Once an offer is accepted, your broker may ask for additional information requested by the lender that wasn’t provided for pre-approval, such as an up-to-date income confirmation.
Mortgage Loan Application
Once an official purchase offer has been accepted by the buyer, your mortgage broker will shop around for the best rates and lenders and submit the mortgage loan application on your behalf.
Once a mortgage application is submitted, the loan processor will take all of the documentation about the borrower and property that has been provided, review the information in your file, and get everything together in a package that will go to the underwriter. They will also:
- Pull your credit report if it wasn’t already pulled during the pre-approval process
- Begin to verify your employment and banking information
- Order a property appraisal if required
An underwriter will closely evaluate all the documentation and information contained in your file that was prepared by the loan processor and will determine whether the borrower and property meet the eligibility requirements for the loan.
Underwriters will also look at your credit report and look for any red flags in your file before making the final decision on whether or not you will be approved for your mortgage.
Congratulations, you’ve been approved for financing and are one step closer to owning your new home! Once you’ve officially been approved for your loan, you will need to pay a visit to your broker and sign all the paperwork that needs to be submitted to your lender.
Lock In Your Interest Rate
During your first meeting, your broker may have provided an estimated interest rate that you would likely be approved for. This number will have likely fluctuated throughout the process and could be higher or lower than expected by the time you are ready to close.
For instance, throughout the 2020 COVID-19 pandemic, interest rates fluctuated dramatically between February and April 2020, and buyers who closed on their homes in the spring may have ended up with a rate that was significantly lower than they were pre-approved for earlier in the year.
Before you can close on your new home, you will need to lock in your interest rate, meaning your interest rate is frozen and will not change unless you went with a variable rate mortgage. Your mortgage broker will advise you on when they feel it is the best time to lock yourself in.
The Chris Allard Mortgage Team’s process is to review various financing options with our borrowers. Based on the knowledge we share with the borrower, he or she will pick the mortgage rate, term, product and lender that they want to move forward with. Of course, we will offer our expertise and nudge them in the right direction.
Conditional Commitment Processing
If you submitted a conditional offer (meaning, the sale can only go through if certain conditions are satisfied), you will not be able to waive your conditions on the property until the conditions are met.
The most common conditions include:
- Buyer can back out of the sale if they do not obtain financing
- A home inspection that is satisfactory to the buyer must be completed
- Sale is contingent on the sale of the buyer’s current property (this one is less common in today’s real estate market)
Once all of the offer contingencies have been satisfied, you will meet with your lawyer to sign the closing documents.
When Is the Ideal Time to Meet With a Mortgage Broker?
It’s never too early to meet with a mortgage broker. As soon as you decide you are ready to buy a new property, make the call right away and set up an appointment.
From helping to set your budget to jump-starting the pre-approval process, a mortgage broker can provide you with a wealth of knowledge and guidance that your realtor doesn’t have.
Contact the Chris Allard Mortgage Team today and make us a part of your team of real estate experts that will help guide you through this next exciting chapter.
Chris Allard’s experience in the field means he can get you offers with over 50 financial institutions lending in Ottawa. Every lender has many mortgage products they offer, which means Chris and his team will make sure a mortgage caters to your needs while also ensuring you get a competitive rate. Chris Allard is a proud mortgage broker of Smart Debt Mortgages, independently owned and operated. Smart Debt broker #12236.