Mortgage Pre Approval, Mortgage Products and Services
Why do I need to be
Pre Approved for a Mortgage?
There are many reasons you should get a mortgage pre approval, the most important being:
1) Pre Approval Rate Hold - A Pre Approved Mortgage locks in your interest rate at the lowest rate available on the day of your pre approval. This rate lock holds that rate for 120 days while you look for your new home to purchase. If mortgage interest rates go up in that time period you are protected and will still be offered the original low rate from the date your mortgage was pre approved. If mortgage interest rates go down you will automatically receive the new lower rate. So, you literally have nothing to lose, but may actually stand to gain substantially. It is not unheard of for mortgage rates to fluctuate half a percent to a full percentage point throughout a 120 day time period, and if you were calculating what you can afford based on a lower old rate, you may be very disappointed to learn that you can no longer afford that same mortgage amount with the new higher mortgage rates because you didn't take the time to pre approve your mortgage.
2) Know Where You Stand - You can use mortgage calculators and other resources yourself in order to figure out what you can likely afford and have a general idea about what your monthly mortgage payments will be. However, until you consult a mortgage broker for an actual mortgage pre approval, you will not know exactly how much you can afford and why. There are many factors and lending guidelines that may change the mortgage amount you think you can get approved for. Considerations for mortgage approval include credit score, existing debt calculations, income, how you earn money such as commissioned, salaried, hourly, or self employed, as well as, many other factors. Also, some lenders will allow you to use Child Tax Benefit credits for mortgage qualfication and others will not, but there are also rules as to the child age to consider as well. There is so much to consider, that it truly is best to consult a mortgage broker for pre approval prior to house shopping.
3) Strengthen Your Buying Position - Put yourself in the sellers shoes for a moment. If you were a seller you would want to feel some confidence in the buyers offer to purchase. Imagine you are looking at two offers on your property that are relatively similar, and this does happen more often than one might think. If the price, the terms, and the possession date are all similar, then you need to decide on which buyer is stronger and more likely to close the deal. If one of the buyers states they haven't taken the steps to be pre approved for mortgage financing but they have good income, steady jobs and are sure they will get their mortgage financing approved, then it sounds relatively good. If the other buyer states they also have good income, steady jobs, but have also already taken the steps of a pre approval to be sure, and are willing to back that up with a pre approval letter from their mortgage broker, then that sounds better. Which buyer would you choose? A pre approved mortgage is the next best thing to cash in hand!
4) Be Prepared and Ready - There is a variety of paperwork required for your final mortgage approval, of which you can be advised of through your mortgage pre approval process. For example, income verification is needed, and what is required for this varies depending on how you are paid and employed. If you are a permanent full time employee with an hourly rate or annual salary, then you will probably need just a letter of employment and your most recent pay stub. However, if you are a permanent part time employee we will have to average 2 years of your income by using your last two Notice of Assessments. If you are commissioned or self employed, other paperwork will be required as well. Besides income verification, your down payment requires confirmation, and what will be required for this will depend on where the money is coming from such as your own savings, RRSP, asset sales, or gifted down payment all require different forms of confirmation. When you find that perfect house and make an offer to purchase on it, you will want to be ready. Typically, you are given 5 business days (one week) to remove any conditions you have for that offer. It is important to note is that the turn around time for document review can be as long as 48 hours depending on how much volume the lender is currently working with. Even if your offer to purchase and live deal is submitted on the first day, the approval subject to document review may not come back for 48 hours or until day 3, and then getting all the paperwork in on day 3, may just barely make your 5 day condition date possible. There is also the possibility of an appraisal being requested which must also happen in that 5 day time frame. So, if you then are still waiting to get a letter from your employer or ordering Notice of Assessments from Revenue Canada then you are not likely to make your condition removal date on time and may risk losing the house to a back-up offer. It is far better for you to have all paperwork in up-front so that the live deal and all paperwork can go in at the same time making it possible to have your financing done on day 3, so that you can spend your time and money on home inspections and other things on day 4 and 5. The last thing you will want to be spending time on during this 5 day condition period is running around after paperwork for your mortgage financing. You will want to be focusing on property details such as home inspections, gas line locates, permit information, measurements, etc.
Why is using a Mortgage Broker Better?
"Most banks offer a 'Limited Selection' of 5-6 mortgage products, No After Banking Hours Service, No Education to Improve Credit and Usually Take Days or even weeks to let you know If Your Mortgage is Approved..."
"...at TMG with Marilee Fehr you'll get access to over 40 Different Lenders, Personal Service 'After Banking Hours', and you'll get your Approval Notification Initial Contact within 48 Hours of Applying... Guaranteed!"
Some of the finance solutions we offer are:
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 Refinances for debt consolidation, renovation |
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Equity take outs for investment, rental purchases |
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Mortgage switches for better rates on renewals |
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Non-resident rental property purchases |
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Mortgage for the self employed |
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Home owner secured Lines of Credit, etc. |
Get Matched With the Best Offers From the Mortgage Market!Few people know that it is now possible to apply directly to the electronic mortgage market. We provide you with direct access to Canada top lenders. These lenders will provide you with the lowest rates possible.
Get Access to Mortgage Rates 34% Lower Than Bank Posted Rates
In 2005, home buyers who applied directly to the mortgage market received rates that were better than 34% below the average posted rates of the big 5 banks.
Get Over 40 Lenders Competing For Your Business
When lenders compete, you win! Our mortgage partners surveys mortgage lenders for their best mortgage rates and mortgage terms. Our network of over 40 lending institutions include Chartered Banks, Trust Companies, Credit Unions, and Private Lenders.
Closed and Open Mortgages
1. An Open Mortgage allows you the flexibility to pay off some or all of the mortgage at any time, without a penalty. Interest rates are usually higher and are tied to the Bank Prime.
2. A Closed or Fixed Mortgage offers you the security of locking in your interest rate for the term of your mortgage, so you know exactly how much principal and interest you will be paying on the mortgage during the term. Terms range from 6 months through to 10 years. Should you wish to pay off some or all of the mortgage prior to the end of the term you will have to pay a penalty. 3 months interest or interest differential is standard.
3. A Variable Rate Mortgage allows take advantage of today's low Prime Rate. Most variable rate products are set either at Prime or slightly below. The terms range from 3 - 6 years. Payments vary depending on the product or lender you choose. In some cases you can fix your payments for up to 5 years, but the interest rate will fluctuate as the Bank Prime Rate changes. In other cases your monthly payments will fluctuate depending on how many time the Prime Rate Changes during your term.
For your convenience, a general list of Mortgage Terms have been provided here for better understanding:
Agreement of Purchase and Sales
The legal contract a purchaser and a seller go into. We recommend that you have your offer prepared by a professional realtor that has the knowledge and experience to satisfactorily protect you with the most suitable clauses and conditions.
Amortization Period
The number of years it takes to repay the entire amount of the financing based on a set of fixed payments.
Appraisal
The process of determining the market value of a property.
Assets
What you own or can call upon. Often used in determining net worth or in securing financing.
Assumtion Agreement
A legal document signed by a buyer that requires the buyer assume responsibility for the obligations of an existing mortgage. If someone assumes your mortgage, make sure that you get a release from the mortgage company to ensure that you are no longer liable for the debt.
Blended Payments
Equal payments consisting of both an interest and a principal component. Typically, while the payment amount does not change, the principal portion increases, while the interest portion decreases.
Canada Mortgage and Housing Corporation (CMHC)
CMHC is a federal Crown corporation that administers the National Housing Act (NHA). Among other services, they also insure mortgages for lenders that are greater than 80% of the purchase price or value of the home. The cost of that insurance is paid for by the borrower and is generally added to the mortgage amount. These mortgages are often referred to as “Hi-Ratio” mortgages.
Closed Mortgage
A mortgage that cannot be prepaid or renegotiated for a set period of time without penalties.
Closing Date
The date on which the new owner takes possession of the property and the sale becomes final.
Collateral
An asset, such as term deposit, Canada Savings Bond, or automobile, that you offer as security for a loan.
Conventional Mortgage
A mortgage up to 80% of the purchase price or the value of the property. A mortgage exceeding 80% is referred to as a “Hi-Ratio” mortgage and the lender will require insurance for that mortgage.
Credit Scoring
A system that assesses a borrower on a number of items, assigning points that are used to determine the borrower’s credit worthiness.
Demand Loan
A loan where the balance must be repaid upon request.
Deposit
A sum of money deposited in trust by the purchaser on making an offer to purchase. When the offer is accepted by the vendor (seller), the deposit is held in trust by the listing real estate broker, lawyer, or notary until the closing of the sale, at which point it is given to the vendor. If a house does not close because of the purchaser’s failure to comply with the terms set out in the offer, the purchaser forgoes the deposit, and it is given to the vendor as compensation for the breaking of the contract (the offer).
Equity
The difference between the market value of the property and any outstanding mortgages registered against the property. This difference belongs to the owner of that property.
First Mortgage
A debt registered against a property that has first call on that property.
Fixed-Rate Mortgage
A mortgage for which the interest is set for the term of the mortgage.
Gross Debt Service Ratio (GDS)
It is one of the mathematical calculations used by lenders to determine a borrower’s capacity to repay a mortgage. It takes into account the mortgage payments, property taxes, approximate heating costs, and 50% of any maintenance fees, and this sum is then divided by the gross income of the applicants. Ratios up to 32 % are acceptable.
Guarantor
A person with an established credit rating and sufficient earnings who guarantees to repay the loan for the borrower if the borrower does not.
High-Ratio Mortgage
A mortgage that exceeds 80% of the purchase price or appraised value of the property. This type of mortgage must be insured. To avoid the cost of the insurance, a 1’st mortgage up to 80% is arranged and a 2’nd mortgage for the balance (up to 90% of the purchase price).
Home Equity Line of Credit
A personal line of credit secured against the borrower’s property. Generally, up to 75% of the purchase price or appraised value of the property is allowed to be borrowed with this product.
Interest Adjustment Date (IAD)
The date on which the mortgage term will begin. This date is usually the first day of the month following the closing. The interest cost for those days from the closing date to the first of the month are usually paid at closing. That is why it is always better to close your deal towards the end of the month.
Interest-Only Mortgage
A mortgage on which only the monthly interest cost is paid each month. The full principal remains outstanding. The payment is lower than an amortized mortgage since once is not paying any principal
Mortgage
A mortgage is a loan that uses a piece of real estate as a security. Once that loan is paid-off, the lender provides a discharge for that mortgage.
Mortgagee
The financial institution or person (lender) who is lending the money using a mortgage.
Mortgagor
The person who borrows the money using a mortgage.
Open Mortgage
A mortgage that can be repaid at any time during the term without any penalty. For this convenience, the interest rate is between 0.75-1.00% higher than a closed mortgage. A good option if you are planning to sell your property or pay-off the mortgage entirely.
P.I.T.
Principal, interest, and property tax due on a mortgage. If your down payment is greater than 25% of the purchase price or appraised value, the lender will allow you to make your own property tax payments.
Portable Mortgage
An existing mortgage that can be transferred to a new property. One would want to port their mortgage in order to avoid any penalties, or if the interest rate is much lower than the current rates.
Prepayment Penalty
A fee charged a borrower by the lender when the borrower prepays all or part of a mortgage over and above the amount agreed upon. Although there is no law as to how a lender can charge you the penalty, a usual charge is the greater of the Interest Rate Differential (IRD) or 3 months interest.
Prime
The lowest rate a financial institution charges its best customers.
Principal
The original amount of a loan, before interest.
Rate Commitment
The number of days the lender will guarantee the mortgage rate on a mortgage approval. This can vary from lender to lender anywhere from 30 to 120 days.
Renewal
When the mortgage term has concluded, your mortgage is up for renewal. It is open at this time for prepayment in part or in full, then renew with same lender or transfer to another lender at no cost (we can arrange).
Second Mortgage
A debt registered against a property that is secured by a second charge on the property.
Switch
To transfer an existing mortgage from one financial institution to another. We can have this arranged for you at no cost to you.
Term
The period of time the financing agreement covers. The terms available are: 6 month, 1,2,3,4,5,6,7,10 year terms, and the interest rates will be fixed for whatever term once chooses.
Total Debt Service (TDS) Ratio
It is the other mathematical calculations used by lenders to determine a borrower’s capacity to repay a mortgage. It takes into account the mortgage payments, property taxes, approximate heating costs, and 50% of any maintenance fees, and any other monthly obligations (i.e. personal loans, car payments, lines of credit, credit card debts, other mortgages, etc.), and this sum is then divided by the gross income of the applicants. Ratios up to 40 % are acceptable.
Variable Rate Mortgage
A mortgage for which the interest rate fluctuates based on changes in prime.
Vendor Take Back (VTB) Mortgage
A mortgage provided by the vendor (seller) to the buyer.