Shopping for a Mortgage

Before you start looking for a home, the first step is to find out how much of a mortgage you qualify for and also to get a handle on your finances, down payment source and amount available for deposit.  I will not  show anyone a home until I know that they are well on their way to getting approved financing and with my clients’ permission, have spoken to their mortgage agent.

You can find many online calculators that ask you to input your salary, debts and liabilities, assets and it will give you a mortgage qualification amount.  I have a great app on my website for this.  The number provided though is just a guideline and may not mean you can get a loan for that amount.  You must always verify this with a mortgage agent or bank. When you visit an expert, make sure that you complete a loan application, that your mortgage agent is looking at your credit scores and that you have given them accurate numbers for your salary, debts and liabilities and assets.  

Documents to Bring to Your Meeting

A mortgage agent or bank representative will ask you for most if not all the following documents. Be proactive and take them with you to the first meeting to avoid delays in getting prequalified or preapproved.

*Identification such as a driver’s licence.

*Social Insurance Number (SIN)

*A summary of assets including balances in saving and checking accounts, RRSP and investment balances, vehicles you own 

*A summary of liabilities including credit cards, mortgages, loans and other debts

*Pay stubs

*T4 and T1 General/Notice of Assessment

*Employment letter

*Documentation of any alternative sources of income

*If you are self-employed, 2 years Notice of Assessments (NOA) and proof that business was incorporated for at least 2 years

*Proof of Down payment including bank statements, RRSP and investment statements, source of borrowed funds

Prequalification

A prequalification means that based on the information provided to the mortgage agent, you are qualified for a certain amount of a mortgage. This may or may not include your down payment. For example, you may be qualified for a $500K mortgage but you also have a down payment of $200K. 

Your purchasing power may now be $700K. Double check this with your mortgage agent.

A prequalification may or may not include checking all the details in your mortgage application. It does not mean that you are approved for this mortgage amount. It means you MAY be approved for this mortgage amount based on the information provided. Use this information carefully when bidding on homes, especially if you are removing the financing condition from your offers as a bidding strategy.

Preapproval

A pre-approval means that the lender has given approval for a mortgage before you purchase a home. Not all banks or lenders will do this.  It is almost a guarantee that you will get this mortgage amount depending on the property you select.

Because not all lenders will issue a pre-approval, it is VITAL that you discuss your financing position with your mortgage agent and be very comfortable with your financial position.

Why Rate isn’t the only Thing to Consider

Getting a good deal and saving as much money as possible is important but the best rate may not be the best option for you, nor may you qualify for the best rate.

Sometimes, very low-rate mortgages are no-frills mortgages which means there are no benefits associated with them.  You may not be able to pay down the balance earlier, you may have to pay a huge penalty to break the mortgage for example if you sell the home before the mortgage term is up. 

Paying a tiny bit more in a rate, can save you thousands of dollars if there are any changes in your life situation and it will only cost you a few dollars more a month.  

If you are not a perfect triple-A client, with stellar credit, a stable salaried job, and little debt, you may not qualify for rock bottom interest rates. 

A good mortgage agent will explain all of this to you and put you in a mortgage package that makes sense for your situation, lifestyle and any upcoming life changes. Make sure to ask a lot of questions.

WARNING

After you have been prequalified or preapproved, please do not do anything to change your credit application until you get the keys to your new home. This means avoid job changes and career changes, taking out new credit such as buying furniture, cars, credit cards or lines of credit.   A lender can REVOKE your mortgage approval at the very last minute.  For example, if you decide to buy furniture for your new home a few days before closing and finance it with the furniture store or on your credit card, the mortgage lender can look at your credit report up until the day of closing. If they find something they do not like, they can decide not to give you a mortgage and you may not get your home.  Always be in touch with your mortgage expert in case you have any questions.