There are multiple professionals who are involved in a typical real estate transaction which may sometimes cause some confusion. Below you’ll find a summary of the most common individuals you will run into if you’re purchasing or refinancing a property and what expectations you should have of them.
Start with the basics
Your maximum mortgage amount is determined through a pre-approval and/or preliminary consultation with a mortgage professional who can arrange financing for you. The role of the mortgage professional is to keep you, as the borrower fully informed and up to date throughout the financing approval process. Independent mortgage professionals essentially represent and work for both the borrower and the lender, and are most often paid a commission by the lender they choose to take you to. This means their services are free for the borrower, though there may be some exceptions if private funding is required.
Financial institutions such as Banks, Trust Companies and Credit Unions also have their own mortgage specialists who are able to help you secure a mortgage. However, unlike independent mortgage professionals who act as a liaison between the borrower and many lenders, these mortgage specialists most often have access only to the products offered by the lender they are employed with. Again, there may be some exceptions as some specialists working with just one lender may also have the ability to refer you to an alternate lender they work should there be any issues with you qualifying.
Find the funds
The lender is any person, group of persons or institution who make mortgage funds available to borrowers. These can be financial institutions; such as chartered banks, trust companies, (mortgage) loan companies, credit and pension funds; mortgage investment companies (MICs); governments or life insurance companies. The lender is the “glue” that holds the mortgage together, and without them, there is no one to provide the funds for the mortgage.
When it comes to mortgages, even lenders need protection. In Canada, mortgage financing with less than 20% downpayment must be insured against default by 1 of our 3 mortgage default insurance companies. This insurance protects the lender in the event their borrower stops making their mortgage payments. Their fee, also known as the insurance premium is the responsibility of the borrower and is usually added to the mortgage amount. It often makes a small difference in the mortgage payment, and allows the borrower to buy with less than 20% downpayment.
Explore all of the property options
After you’ve determined how much you can qualify for with a mortgage pre-approval, a realtor will help you navigate through all of your property options. You can think of them as your own personal shopper who will be there for you throughout the purchase process. With their knowledge and experience in the real estate industry, they can offer guidance about paying a fair price, location pros and cons, and bring things to your attention that you might otherwise not think of.
Inspect your investment thoroughly
A property / mechanical Inspector is a qualified home inspector who will evaluate the property and provide a written report on the interior and exterior structure including plumbing, electrical work, insulation, heating and cooling systems as well as overall structural stability. This is a critical step if you’re buying an older home and should not be overlooked, an unexpected and costly repair that is missed can be a huge expense for a new homeowner.
Make sure you’re paying a fair price
A real estate appraiser determines the market value of the home based on its condition and the selling price of comparable homes recently sold in the area. The estimate of market value determined by the appraiser helps the lender decide on a reasonable loan amount for the new mortgage in the event of a refinance, or ensures the purchase price is fair if you’re buying a home. An electronic property valuation is accepted in some mortgage scenarios instead of a formal appraisal and this is most always the case if you are buying a home and obtaining financing that requires default mortgage insurance.
Add an extra layer of protection
A lawyer has to be involved in every home purchase mortgage transaction as they protect the interests of both the lender and the homebuyer. You can expect your lawyer to be responsible for the following;
- Assist with and review the Contract for Purchase and Sale
- Preparation and review of mortgage documents with you
- Ensure all closing documents have been completed properly such as the title search and title insurance
- Explain all closing documents, obtain signatures and file all documents with the appropriate local governments
- Collect the transaction fees and disburse funds to the appropriate parties
- Prepare and present a final Statement of Adjustments to all parties involved which details how much they will owe or will be paid
The real estate experience can be different for everyone and there are always exceptions to the norm. It’s not unreasonable for your expectations to include professionals who keep you in the loop and answer any questions you may have until you’re comfortable making a big decision such as buying or refinancing a home. Shop around for professionals until you find someone who shares your vision and values. Ask family and friends for referrals, read the online reviews and don’t be afraid to ask for references.