If you’re eager to buy a home but feel unsure about what’s involved in getting approved for a mortgage, here is everything you need to know about how the stages of the approval process work.
First and foremost, your personal information, including your full name, current address, birth date, current employment information, and the status of your assets and liabilities will all be collected and reviewed.
2) Credit Review
The next step is a review of your credit standing. Your information with the credit bureau will be assessed in order to review how you have managed credit in the past. A run through of the numbers comparing your income to monthly obligations will determine if you can debt service your new mortgage payments.
3) Documents Collected
At this point, any related or required documents may be collected, pertaining to verification of your income and support for providing a down payment.
4) Pre-Approval or Pre-Qualification Complete
Once your information and credit rating has been reviewed you will be advised how much you qualify for. If a rate hold is required your file will be submitted to a lender for preapproval to hold a rate while you shop for that home. Pre-Approval and Pre-Qualifications are still subject to a full underwrite to determine if the lender will accept the application and the property.
5) Lender and Insurer Approval/ Appraisal
Depending on your down payment amount for your purchase your mortgage can be labelled as a high-ratio or conventional. If it is high-ratio, it will require mortgage insurance, and your lender will submit an application along with the property info for you to get approved. If it’s conventional and does not require mortgage insurance, in order to ensure the lending value of the property meets their approval, an appraisal may be required. The lender will issue a mortgage commitment outlining the terms and conditions required to fulfill the mortgage to fund the purchase.
6) Meeting Final Conditions
Once you have been approved, you must then ensure that you have met all of the lender’s conditions and provided them with the necessary documentation to verify all of the information they required in order to seal the deal.
7) Finalize the Deal
After you have received the final approval, you must finalize the deal. This entails signing the lender mortgage documents, including creditor life insurance and/or term life insurance. Home and fire insurance will then be arranged, and finally you will sign the legal mortgage documents in the presence of your lawyer to officially and completely close the mortgage transaction.
Whether you’re looking to purchase a home, or simply interested in how the approval process works for a mortgage, you can refer to each of these steps to help guide you through the process. And if you’re feeling overwhelmed, your mortgage advisor is always there to help with any questions or concerns you may have a long the way.