Taking on new debt is pretty easy and it usually only takes a signature on the dotted line to get a car loan, a new credit card, or a small line of credit. Getting a mortgage is more involved and below you will find the 10 steps to financing your new home.
1) Find a friend
Find a mortgage professional you feel comfortable talking to about likely the largest investment of your life so far. If you don’t already know someone, ask your friends and family for referrals to professionals they have enjoyed dealing with or go on line and read some reviews. Whichever way you go, do be confident with your choice and don’t be afraid to call a few professionals before you find one you look forward to working with.
2) Fill out the mortgage application
The details in your application are going to be confirmed by the lender via supporting documentation so be as accurate as possible when it comes to income, assets, liabilities and monthly payment amounts. This along with a conversation with you the borrower will allow us to determine your financial profile so we can determine the best way to structure your mortgage submission for an approval.
3) Get a pre-approval
Once we have discussed what kind of mortgage best suits your needs during the application period, we will then submit your application to a lender for a pre-approval. Whether it’s a verbal or a written rate-hold from a lender, a pre-approval will give you an idea of your maximum purchase price when you are shopping for a new home. Most rate-holds vary from 90- 120 days. Keep in mind, a pre-approval is just the lender giving you the okay based on what you have told them, the lender still has to review the property and supporting documentation before your mortgage is a sure thing.
4) Upfront documents may be required
Depending on how your pre-approval process goes, your potential mortgage lender may want to see some upfront documentation and if can’t provide a document that is required of you, talk to your mortgage professional about an alternative.
5) Happy House Hunting!
Now that you know what the upper end of your price range is, you can go shopping. Whether you are working with a realtor or not, it is always important to know what you are getting into so ensure you have an inspection and a financing condition on your Offer to Purchase. If you are thinking of buying privately, make sure you speak to a lawyer or realtor so your best interests are protected. Once you find a home and make an offer you will be required to provide an initial deposit of usually $2000 – $5000.
6) Submit the property for approval by your mortgage lender
Once you have an accepted offer, you can send that over to your mortgage professional along with a feature sheet that describes the property, who will then submit it to your mortgage lender for approval. They will be looking at the property details and your application as a whole and once they’ve made a decision, you will get a “conditional approval” or a decline. If you get an approval, you’re onto the next step.
7) Review your Mortgage Approval
Once your lender has approved your application you will get a mortgage commitment that will be reviewed with you. This very important document will contain details about your mortgage payment, your pre-payment privileges, your payout penalty, as well as other legal jargon about your new mortgage. Be sure you understand it before you sign to accept and if there are some unfamiliar terms ask your mortgage professional about them.
8) Satisfy the outstanding conditions
Obtaining a mortgage approval is just the first step as it is still “conditional”. That means the lender has set out a series of documents you need to provide for review and acceptance by them. You will be asked to give them documents confirming your income, downpayment funds and depending on the amount of your downpayment, a property appraisal may be required in order to confirm the property’s value. The mortgage approval will clearly outline what documents you need to provide in order for your mortgage approval to become “unconditional”.
9) Sign final documents at the lawyers
Once the lender has accepted all of your supporting documents and you have agreed to the terms of your new mortgage, your lender will send instructions to your lawyer. The lawyer will have to do some work on their end in order to get the mortgage funds from the lender and once the money is transferred to the seller’s lawyer, the property is yours. This is when the majority of your cash to close will be due. Closing costs consist of legal fees, condo fees if applicable and any property tax adjustments. I would suggest asking your mortgage professional for an estimate of the closing costs will be and then your lawyer will be able to confirm the exact figures when you’re in their office.
10) Welcome Home!
Now that you’ve got your keys, the home is yours! Be prepared for your first mortgage payment to come out within the first 14-30 days after you’ve taken possession. You may also have a small interest adjustment due during those first few weeks, so double check with your lender and/or lawyer on when and how much will be due.
While buying a home can involve multiple professionals including a realtor, lawyer, property inspector, or appraiser, among others, the mortgage professional is the glue that holds it all together. Without the mortgage, you cannot buy the property, so keep your mortgage professional in the loop during your home buying process so the process goes as smooth as possible.