The Process of Receiving a Credit Loan – Mortgage

The process of receiving a mortgage for the purchase of the real estate includes the following stages:

First stage – meeting with mortgage specialist, filling out application, discussing available variants and choosing the most suitable one;

Second stage – selecting all necessary documents, based on bank (the lender) requirements;

Third Stage – application and appropriate documents are sent to the bank;

Fourth stage – signing the received mortgage approval from the bank and fulfilling any additional requirements, if any are presented;

Final stage – lawyer legalizes the documents on transfer of property and reception of mortgage, you become the owner of the desired dwelling.

Let’s take a close look at the above stages.

Meeting with an expert on mortgage registration for future dwelling (mortgage specialist). A lot depends on this first meeting, especially for those who are going through the process for the first time. The best decision you can make is to meet with the specialist before you have decided to seriously undertake the search for the new dwelling. The specialist can satisfy many questions: what mortgage amount can one reasonably count on, what mortgage types are available (closed, open, and fully open mortgage, fixed and variable rate) and will answer any other kind of questions you have. Together, you will calculate monthly payments for various possible mortgage types.

During this stage it is possible to receive a pre-approval on a mortgage, which will usually be in effect for 4 months.For the pre-approval you don’t need to provide any documentation, everything is done on the basis of what you say. However, credit history is checked.

Often dwelling is bought first and then search for the mortgage begins. In this case, it is essential to act fast, since only a few days are given for the registration of mortgage.

Besides that, there is a certain benefit from meeting with mortgage specialist first. Firstly, you know with a certainty the cost of the dwelling appropriate for you (as well, it is important for a realtor to know what you can afford). Secondly, the realtor and you feel more confident while selecting a dwelling and at the moment of offer. Thirdly, if you have bank’s pre-approval, you have an easier time purchasing dwelling in case of multiple offers – offers from more than one potential buyer.Fourthly, there are fewer hassles, because you have already discussed all possible future problems and there should be no surprises. If you have a pre-approval, then everything is just great. Finally, for those who are self-employed and own a business, it is absolutely necessary to meet with a specialist first, and then begin to deal with a realtor!

If you don’t have a bank’s pre-approval and you have made an offer for the purchase, which was accepted, most often you have a few days for mortgage registration. During these days you can cancel the purchase and take back your deposit. Usually, these few days are enough to get bank’s mortgage approval. It is very important to fully complete the mortgage application and send it to the bank. For your convenience, you can find this form on our website. The application will contain all the relevant information about you and based on this information, the bank decides whether to offer the mortgage or not. Of course, any information filled in the application must be supported by appropriate documents. If you submitted all documentation at once, then bank’s decision making process will be fast and the “approval” will be free of any conditions. It’s not always the case that all the papers are ready, since getting all the documentation usually takes time. If not all of the documents are received by the bank, mortgage approval will carry certain conditions, which must be discussed with the specialist and fulfilled.

Some buy dwelling, some renew the contract for a new term, some re-finance the dwelling or register credit line. Different documents are required for different situations. Besides that, some work full-time, some run their own business or work for themselves. List of all required documents for various circumstances is available for you on our website. Documents can not be outdated. Date on the certificate of place of work, for example, cannot be older than 3 months. Sometimes bank asks to substitute one document for another, a more recent one or with more comprehensive information. This is the second stage in the process of receiving mortgage and might be the most important one.

In the process of making a decision about mortgage approval bank assesses not only your solvency, but also the real estate that you are buying. A special institute of professional appraisers of real estate, approved and hired by the banks, is responsible for this appraisal. The bank has to make sure that in case of unfavourable turn of events it can still sell the dwelling, thus covering bank’s costs. Accordingly, the one who gives the mortgage has to make sure that the mortgage is of appropriate size and is relevant to the actual cost of the real estate. Such appraisal is usually of two types – full and limited-restricted (drive-by). Full appraisal costs about $250-300, while drive-by is priced from $100 and up. If the mortgage you are receiving is more than 20-25% of the dwelling price, than you must personally pay for the appraisal. If it is less, then you don’t have to pay. The cost of this appraisal will be included in mandatory mortgage insurance with small initial down payment.

During the third stage, most of the necessary work is performed by the mortgage specialist. It is his/her responsibility to analyze the specific situation and choose the right financial institution that will most likely provide the mortgage.

Finally, the approval is received and the bank sends all the conditions of the mortgage (mortgage commitment) to the mortgage specialist. At this stage, it is necessary that you and the mortgage specialist analyze all the conditions of the bank’s mortgage and sign the required papers within 10 days. It is desirable, especially when registering a mortgage for the first time, to receive detailed explanations from your mortgage specialist about all stated mortgage conditions.

As soon as the bank receives from you the signed documents, and you have fulfilled all additional conditions, the file is completed – the process of receiving and checking documents is finished. During this final stage, the lawyer representing you will receive a special letter with appropriate instructions. Normally, the bank collaborates with the lawyer, whom you have chosen your self and who usually specializes in this specific field. You sign the papers the lawyer gives you and take the keys – that’s about it. What does the lawyer do and why do all the purchasing-selling procedures in Canada have to go through a lawyer? Usually the lawyer is responsible for the following:

Helps with contract verification of the purchasing-selling process;
Helps with preparation and verification of final documents on mortgage;
Makes sure all documents are filled out properly, including title search and title insurance;
Explains all final documents, receives the necessary signatures and registers all documents in the required government institutions;
Receives the money from the buyer and the bank, and distributes them between the seller and the bank, if the selling side had the mortgage;
Preparation of the closing documents and their delivery to your house via mail.