Best Practice - Applying For A Bank Or Institutional Mortgage

Best Practice - Applying For A Bank Or Institutional Mortgage

Best Practices When Applying for a Mortgage or Mortgage Refinance

Ten years ago, before crash of October 2008, mortgages were easy to get and the rates were thought to be fantastic at the time.  This was the view back then by anyone I spoke with.  Rates were about 5.50% more or less and we had zero down payments and 40 year amortizations.  If you had good credit, and was in business for yourself, then often a letter declaring what your income was would suffice as proof of income. 

Flash forward to 2018 and it seems as if the mortgage axis has tilted 90 degrees.  Now the minimum down payment is 5% and 10% if buying a rental investment property.  Sources of income must be proven, documented and re-documented.  The tracking of down payments and closing costs must be documented and held to the highest of scrutiny by bank auditors.  The Federal Government has taken the driver seat and escorts all banks and mortgage lending institutions through each mortgage file to ensure full and complete compliance to their newest regulations and guidelines. 

Being human leads us to the thought “is there any way around such tough sanctions and mortgage lending regulations and guidelines"?  The answer to this is a simple “YES”.  It’s called private lending which translates to 25% down payment or more, double or more the mortgage rates of the banks, and shorter terms, just to name a few variances. 

Private Mortgages are a great option when one does not meet current institutional guidelines.  We’ll review private mortgages in greater detail in another blog article. 

In the meantime, let’s look at what the average summary of documentation and information required to successfully close a Canadian Institutional Mortgage looks like.

  1. A fully completed Application for the mortgage you’re asking for;
  2. Items in the following list may not all apply and my not exhaust all of what could be asked for by the bank.  There are some differences to required documents depending upon your sources of income. 
  1. Current year to date pay stub;
  2. Employment Letter for Mortgage Purposes;
  3. The last two full years of Income Tax Returns and their associated Income Tax Notices of Assessment;
  4. Copies of T4s associated with your income tax returns;
  5. Confirmation that Income Taxes are paid up to date and in good standing;
  6. Three to six month banking statements showing payroll deposits;
  7. If business for self, copies of your Articles of Incorporation and/or Business Name Registration;
  8. If business for self, copies of recent invoices issued for services provided together with the banking statement where the funds were received and deposited into the business bank account.
  9. If Incorporated, copies of the last two to three years Financial Statements;
  10. Copy of the Agreement of Purchase and Sale and MLS Listing if purchasing;
  11. Credit Bureau inquiry;
  12. Copy of current property taxes bill if refinancing;
  13. Copy of fire insurance policy if refinancing;
  14. Copy of a recent property appraisal if refinancing or if purchase down payment exceeds 20%;
  15. Copy of 3 to 6 months banking statements confirming where down payment funds are being held – if purchasing. 
  16. Two pieces of ID – one photo and one secondary;
  17. Copies of debt statements for any debt being paid at refinance from the mortgage proceeds;
  18. An up to date property appraisal (this is paid for by the lender insurer if your purchase down payment is less than 20% (unless purchasing a property that is not listed on the MLS system).
  19. Name and contact information for your lawyer;
  20. VOID Cheque or Auto Debit form for the account you want your mortgage payments drawn from.
  21. Current Mortgage Statements if refinancing;

If you are in business for self, I highly recommend that you ensure your Business Name Registration is up to date and if incorporated, that your minute book is up to date.  The business name registration lasts for 5 years and then must be renewed. 

The key to limiting frustration during the today’s mortgaging process is to work with a Mortgage Broker you trust and who has your best interest as a priority.  Also ensure your mortgage agent or broker is asking you for the supporting documents up front.  This shows they know what they are doing and have experience is successfully closing mortgages timely and in a smooth and professional time line.

Watch for my upcoming blog surrounding Private Mortgages.

Leslie Fallaise is the principal broker and owner of CENTUM Mavin Lending Ltd. servicing Ontario Canada.  She has over 25 years experience in mortgages and lending. 

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