Getting a mortgage in Canada used to be a fairly easy process. You grabbed a couple of pay stubs, got an employment letter from your HR department, and you were good to go. A lot of older Canadians remember applying for a mortgage was just that way.
Not anymore. Today getting a mortgage is a complex process involving the collection and submission of a large amount of documentation, 6 to 7 times more than previously. This can be daunting for a lot of borrowers. This is why it is critical to work with a mortgage agent to help you through the mortgage application process. It’s also why partnering with a mortgage agent is the very first thing you should do and the first step to getting home. No mortgage, no house.
So, why is the mortgage application today so complicated? It’s because our world today is more complex and involved than it has even been before. Most Canadians don’t have jobs that they have worked in for 5 years and plan to work for another 25 or 30 until they get the ‘gold watch’. Canadians don’t pay cash for everything; they use a lot of credit. Canadians don’t get married in their 20s and stay married for the rest of their lives. Things are complicated.
Then there is the housing market. People aren’t looking for a $100,000 mortgage based on a family income of $120,000 to purchase a $170,000 home. That was 20 years ago. The numbers today are a lot bigger. Then there are government initiatives to cut down on money laundering, mortgage fraud, foreign ownership, and so forth.
The result is a new mortgage landscape that is a lot more complex due to:
- Stricter regulatory requirements
- Canadians have increasingly complex personal and financial lives
- High amounts of borrowing
- More Intensive appraisals
- More stringent credit requirements
- Continuously changing market conditions
- New restrictions on foreign buyers
So yeah, getting a mortgage today is a much more complicated process, which is why you need a licensed mortgage agent such as myself to help you through it.
Beware of the Mortgage 10 Commandments
Meeting with Lawyer and Funding
Before Getting a Mortgage
Now I’m assuming you have done all the things you need to do to put yourself in a position to buy your home and get yourself mortgage financing. You should have established a relationship with a licensed mortgage agent, who you’ve worked with to create your mortgage strategy and your mortgage plan around your goals, your risk profile, and what you want to achieve. You’ve followed my guidance on strategies to build your down payment, minimize taxes, build up your credit score, position your career, and maximize your borrowing position. Not sure what I’m talking about? See my other videos, read my articles on AllenEhlert.com, or just become a client; there’s no cost.
So let’s start the mortgage application process.
Pre-qualification
A mortgage pre-qualification is an initial assessment that helps a borrower understand how much they might be able to borrow for a home purchase. This stage is often the first step in the mortgage process, providing an estimate based on basic financial information without a thorough review, credit check or commitment from the lender.
A mortgage pre-qualification isn’t a stage or step in the mortgage process because a mortgage pre-qualification isn’t a reliable gauge at all when it comes to how much someone qualifies for. It’s a marketing gimmick, usually through an online calculator that often gives very false assurances on what kind of mortgage you could be looking at. You shouldn’t trust it.
You must never make an offer to purchase a property or waive your condition of financing based on a mortgage pre-qualification. A mortgage pre-qualification doesn’t qualify you for anything.
Pre-approval
A mortgage pre-approval involves a lender reviewing your financial information—including income, debts, credit history, and assets—to determine how much they might be willing to lend you for a home purchase. This process is more comprehensive than a simple pre-qualification, which usually doesn’t involve a credit check or a financial review.
Get your documents together. Before you start looking for a home, you need to work with me to get all your documents together. You are going to need to build a package. How fast your application can move through the process is usually dependent on how fast you can get your documents together. Different people have different situations, which will require different lists of documents to be assembled for submission. I’ll work with you to get your package together. Whether you get pre-approved or go straight to a mortgage commitment, you need to have your documents together.
A pre-approval isn’t necessary, but it can be helpful. There are over 10 kinds of lenders in Canada, of which banks and credit unions are two, and it is mostly banks and credit unions that offer pre-approvals. What you are looking for isn’t so much the pre-approval letter as the mortgage commitment.
Benefits of Getting a Pre-Approval Letter:
- Budget Clarity: Understand how much you can afford before you start house hunting.
- Interest Rate Hold: Some lenders offer to lock in an interest rate for a certain period (typically 60 to 120 days), protecting you from rate increases.
- Realtor: With the pre-approval letter in hand, you can tell your realtor or have your mortgage agent tell your realtor how much house you are looking to buy. It makes no sense for a realtor to show you million-dollar homes when you can only afford $800,000.
- Faster Closing Process: Having pre-approval can speed up the final mortgage approval once you’ve found a property because the lender is more familiar with you.
A pre-approval gives you enough information for you to begin to look for a home.
Mortgage Commitment
A mortgage commitment is a formal, written agreement from a lender indicating they are willing to lend a borrower a specific amount under certain terms and conditions. It’s an important document in the mortgage process because it solidifies the lender’s offer, providing the borrower with a level of assurance that the financing for a property will be available.
A mortgage commitment is really a ‘conditional’ commitment insofar as the commitment by the lender is only made once all conditions are satisfied.
Often clients get pre-approved, but a pre-approval is a weaker document provided through a letter from the lender saying they will probably give you a mortgage. However, a mortgage commitment is a stronger document. It says the lender is good to lend on this property if all the conditions described in the mortgage commitment are met. To meet these conditions, additional documentation (such as an appraisal and Agreement of Purchase and Sale) is required to move the mortgage application to lender approval. I will work with you to help you meet your conditions.
Agent Complete
The ‘Agent Complete’ phase of the mortgage process refers to the stage where the mortgage agent has fulfilled all their responsibilities and submitted all necessary documentation and information to the lender for review. At this point, the agent’s involvement in gathering and verifying documents is essentially complete, and the application is ready for the lender’s final review or approval.
Here’s what “Agent Complete” typically means in the mortgage process:
- All Conditions Have Been Addressed
The agent has helped the client gather all required documents and has submitted them to the lender. This includes income verification, down payment proof, identification, property-related documents, and any other specific conditions the lender outlined in the mortgage commitment.
Any questions or clarifications requested by the lender have been addressed by the agent.
- File Is Ready for Final Approval
Once the file is marked as “Agent Complete,” it signifies that the agent believes all lender conditions have been met and that the application is ready for final approval.
The agent has ensured that the file is thorough and organized, making it easier for the lender to review without additional back-and-forth.
- Awaiting Lender’s Final Review and Decision
After the “Agent Complete” phase, the file is submitted to the lender’s underwriting team for a final review. The lender will review all the provided documents to ensure everything meets their criteria and that the file is in compliance.
If the lender is satisfied, they will issue final approval, confirming that the mortgage is fully approved and ready for funding on the closing date.
Clear to Close Preparation
If the lender is satisfied with the file and issues final approval, the mortgage moves to a “Clear to Close” status. The agent may communicate this to the client, letting them know they’re ready to proceed with the final steps, such as signing with their lawyer.
“Agent Complete” is a milestone in the mortgage process that signifies the agent’s work on the file is done, and the lender has everything they need to move forward with final approval and funding. It provides confidence to both the lender and the client that the mortgage process is on track for a smooth closing.
Beware of the 10 Commandments
The 10 Commandments isn’t really a phase in the mortgage process, but things applicants must not do after ‘Agent Complete’ so as not to be rejected for mortgage financing. After ‘Agent Complete’, all the conditions required by the lender have been satisfied, but that doesn’t mean that changes in the applicant’s profile after that point can’t derail the process and lose financing. This occurs because the applicant breaks one or more conditions between ‘Agent Complete’ and the final lender underwriting.
Lenders do their final underwriting close to when they are about to fund the file. For example, let’s say you bought a house with a close date 120 days from now. Your file has moved through all the stages of the mortgage application process up to the end of Agent Complete. This happens with most lenders in 30 days; the sooner the better. However, final underwriting by the lender doesn’t take place until just before funding to ensure that nothing has changed in the interim. To ensure nothing changes, ensure you follow these 10 commandments.
Meeting with Lawyer and Funding
The meeting with the lawyer and funding process is the final stage in securing the mortgage, where all legal and financial elements come together for a successful property transfer. The Mortgage Agent’s role, while less direct, involves preparing the client, ensuring that funds are released smoothly, and addressing any last-minute needs.
The meeting with the lawyer typically occurs a few days to a week before the closing date. This timing allows enough time to review and sign all necessary documents, address any last-minute issues, and ensure that everything is in order for a smooth closing.
Some lenders also require borrowers as part of the closing process to do an in-branch visit for identity verification, final document signing, or account setup. For example, credit unions require borrowers to be members of the credit union. To do so, borrowers have to go to the branch, pay a small deposit, like a dollar, and become a member of the credit union. Some banking mortgage products are tied to a requirement to open bank accounts with that bank as a condition of mortgage financing.
At the lawyer’s meeting, you will review and sign all required legal documents. These documents typically include the mortgage agreement, property transfer documents, and any additional disclosures or statements required by the lender. The lawyer will explain the terms and conditions of the mortgage and the property transaction, ensuring you understand your obligations, including mortgage payments, interest rates, penalties, and any other specific clauses. Ensure you provide a government-issued photo ID, which the lawyer will use to ensure all documentation is signed by the rightful parties.
The meeting with the lawyer and funding process is essential to the finalization of the mortgage, ensuring all legal, financial, and property details are properly managed. My job in this stage is to provide support through preparation and coordination, to help you experience a smooth and successful closing, ready to enjoy your new home.
Summary
Navigating the mortgage process in Canada can seem overwhelming, but understanding each phase and knowing what to expect can make it much smoother. From the early stages of pre-qualification and pre-approval, you gain a sense of what you can afford, setting you up for success when you start looking for a home. Moving into the mortgage commitment and agent complete stages, you’ll see the mortgage offer firm up as you meet the lender’s conditions, getting you one step closer to your dream home.
One critical reminder is to “Beware the 10 Commandments”—these are guidelines that help you avoid financial decisions that could jeopardize your mortgage approval, like taking on new debt or changing jobs just before closing. Following these guidelines ensures your financing stays intact as you approach the final stages.
Finally, meeting with your lawyer and coordinating funding are the last steps before you officially take possession of the property. This phase completes the process, with all paperwork signed, funds transferred, and keys handed over, allowing you to step confidently into homeownership.
The Canadian mortgage process may be detailed and structured, but with preparation and guidance through each phase, you’ll be ready for a smooth journey from start to finish. By knowing what to expect, staying organized, and working closely with me, you’ll soon be unlocking the door to your new home!
