Natasha Shaw

Ok - so you've been working with your Mortgage Professional and they tell you are Pre-Approved or Pre-Qualified for your mortgage.  We don't want to alarm you but the process doesn't end here.  It's important to know the difference between what a Pre-Approval is and being pre-qualified for a mortgage.  

Just like any lender, your Mortgage Professional will put the necessary measures into place to confirm you will be able obtain the financing you require on your purchase or refinance.  They will prepare you by obtaining all the necessary supporting documentation that is required to satisfy the lenders conditions.  

When you are ready to submit your Offer to Purchase your deal goes 'Live'.  This means that your Mortgage Professional will activate your Pre-Approval with the Lender for further consideration for Approval.  The Lender then underwrites the deal and issues you a Mortgage Commitment outlining conditions*.  

*Please note, that in some cases depending on the application some lenders may require documentation up front before providing a Mortgage Commitment.  Therefore, it's a good idea to be prepared by providing all the information that your Mortgage Professional asks for within reasonable time.  

When you receive your Mortgage Commitment, your Mortgage Professional should review it with you providing you with a list of required or outstanding items to provide the lender.  Your Mortgage Professional will should also talk to about Insurance Options like: Home Insurance, Mortgage Protection Insurance and Title Insurance.  

Here is a typical checklist of supporting documentation that will likely be required by the lender:

1. Personal Identification (2 pieces per applicant)

• Copy of Driver’s License and/or Passport

• Copy of Alberta Health Card or SIN Card

• A major credit card is acceptable but please copy both sides

• If you don’t have at least 2 of the above available, check for other acceptable items.

2. Income Verification

• Self-employed:
  • Latest 2 years NOA’s (notice of assessment from Canada Revenue Agency)
  • Latest 2 years T1 Generals
  • Articles of Incorporation
  • IMPORTANT: If the majority of your income is paid by way of Dividends, please provide your latest 2 years Business Financials
  • Also, some lenders may require 3 years of the items listed above.
• *Employed:
  • Letter of Employment (Letter MUST be on company letterhead including your position, start date & salary and with the name, signature & position of the person signing)
  • Latest 2 pay stubs
  • IMPORTANT: If you earn bonuses or overtime above a base salary, please provide your latest 2 years NOA's.
     

3. Disclosure on all other Real Estate owned

• List including Purchase Price, Date and Current Value
• Latest Mortgage Statements
• Latest Property Tax Bill/Statement
• Latest Leases (if applicable)

4. Purchase Contract – (when Applicable)

• With all Schedules, Amendments and waivers attached or provided as they come up.

5. Subject Property Valuation (varies)

• MLS Listing with photo of property (if applicable)
• Appraisal (may be required)
  • For High-Ratio purchases, an appraisal may be required for Private Sales or if the Mortgage Insurer requires to verify the purchase price.
  • For Rental purchases, an appraisal is usually always required
  • For Refinances, this depends on the Loan-to-value and if it's insured.

6. Down Payment Verification (varies)

• Examples:
  • Savings - typically 90 days banking history
  • Gift letter - must be immediate family member
  • Liquefied assets - available RRSPs or stock by way of statement
  • Corporate funds - must verify that you can use these funds
  • Line of Credit - must be able to service the cost of borrowing
• Ask your Mortgage Professional for more options as applicable to you

7. Closing Cost Verification

• High Ratio/Insured purchases typically require to that you have 1.5% of the Purchase Price (Savings) available for closing costs!!

8. VOID Cheque

• Must be personal cheque from which account your mortgage payment is to be paid from.
• Ensure that at least your name is on the cheque.
• Lenders will no longer accept company cheques.

9. Solicitor Information (Lawyer)

10. Other

• Depending on your case, your Mortgage Professional will likely ask you for additional items to support your approval.
• Conditons vary from Lender to Lender, depending on the type of purchase they may request for additional documentation such as Titles, Vendor Details, etc.

Purchasing a Rental Property? 

• These additional items will be required:
  • Appraisal
  • Rent Verification
    • Lease for Subject Property, or
    • Schedule 'A' of the Appraisal which is a Market Rent Valuation
  • $100K+ Net Worth Verification - Liquid Investments in addition to Real Estate Equity*
    • Ex. RRSPs, Stock, Shares, etc.

*Please note: The lender will often request a certain amount in Liquid Net Worth depending on how many properties you own (Usually over $100K based on the number of properties owned and the purchase price of the subject property).  This is to be verified by your Broker.

[Be prepared: Click here for an update on Lender Changes for Rental Financing]

Related Articles:

• Firm Sale

• Lawyers

• Appraisals

• Buying a Rental Property?