Approval: How Long It Takes and Other Frequently Asked Questions

How long does it take to get approval from a lender?

Once you apply for a mortgage, you obviously want to get the money as quickly as possible. So, how long does it take to get approval from a lender? Several factors determine how long it will take to get the approval:

• Each financier has standard timelines for mortgage application processing
• Different types of mortgages take different periods to process
• Different types of property take different periods to process
• Whether you have submitted all the required documentation

If the application and the documentation are in order, it takes anywhere between a few hours and a few days to get your mortgage approved. To further reduce the time taken to get approval, get a mortgage pre-approval before you start hunting for a house.

Who are private mortgage lenders and when should you get mortgages from them?

A private mortgage lender could be syndicate investors who pool their personal funds and give syndicated mortgages, mortgage investment corporations (MICs) where investors pool funds and give mortgages to those who meet certain criteria or individual lenders. Situations that call for private mortgage lenders include:

• When you need money quickly and you cannot go through the long approval process
• If you have a bad credit score
• If you have an untraditional income source such as self-employment that the bank may not consider to be reliable
• If you are buying a non-traditional property that traditional lenders do not give mortgages for
• If you only need a short-term loan

One way of keeping monthly repayments reasonable is to defer the interest payments to the end (called accrued interest private mortgages) as opposed to amortized blended payment. The latter allows you to build up additional equity in your property. Private mortgage lenders have higher interest rates – a mortgage broker helps you get the best possible deal.

How does the pre-approval process work?

The pre-approval process allows you to find out just how much you can afford for a house. You will be able to tell how much you can and can’t afford. The pre-approval process involves simple calculations to determine the ratio between your earnings and the debt you will incur from the mortgage. Your lender wants to know if you will be able to afford the monthly repayments. Once they are satisfied that you are able to sustain the debt, they will give you a pre-approval letter. This will normally give you a 60 to 120-day guarantee on the interest rate.

What documents do you require for the approval process?

You should get your paperwork together before the application as this will speed up the process. You will need:

• Photo identification: The law requires that you provide a photo ID to protect your privacy and identity.
• Proof of Income: Lenders require that you provide proof of income as a way of showing you will be able to meet your monthly obligations. If you are employed, get the most recent income tax return or T-4 slip from your employer. A letter on your employer’s letterhead stating how much you earn and how long you have been working for them will also help. If you are self-employed, you will need the business financial statements and tax returns going back 2 years.
• Proof of Assets: Your lender will want to know if you have any assets that can act as collateral. These could be GICs, bonds, vehicles and other properties, and stocks. The paperwork should indicate the current value of the assets. Include the relevant bank account numbers.
• Proof of Liabilities: For the lender, just as important as knowing your assets is knowing your liabilities. Supply the lender with your monthly obligations like alimony and child support and how much you owe banks and credit card companies, and any lines of credits you may have.
• Proof of Down Payment: If you have been gifted the down payment by a family member, supply the lender with a letter from the relative, indicating that the amount is not a loan.
• Lawyer Information: Given the amount of money involved in a mortgage, it is wise to enlist the services of a lawyer. Give the name of your lawyer and their contact address to the lender.

What charges should I expect?

While the term “hidden cost” may seem strong, some lenders charge many fees that you should be aware of before taking a mortgage. Hiring a mortgage broker ensures you only pay the right fees. You expect to pay:

• Appraisal fees
• Credit pull fees
• Land transfer fees
• Notary and lawyer fees
• Recording fees
• Home inspection fees
• Title registration
• Relevant taxes

How much down payment will I pay?

You have to pay a down payment for all Ontario mortgages. Most first-time homebuyers erroneously assume that the larger the down payment they put down, the better the mortgage rate you will get. You can put down a down payment of as low as 5% and as high as 20%.

Adjustable versus fixed rate – which should I go for?

A fixed-rate mortgage is one where you will pay a pre-determined interest rate for the entire duration of the mortgage. An adjustable-rate mortgage is one where the interest rate is influenced by economic conditions. You should go for a fixed-rate mortgage if you are on a fixed monthly income and you don’t want to deal with the uncertainty. If, on the other hand, you have sufficient financial cushion capable of absorbing an increase in the monthly premiums, an adjustable-rate is best for you. If you are considering an adjustable-rate mortgage, do your research to determine if interest rates are likely to go down in the near future.

What is the difference between a mortgage broker and a mortgage agent?

Both licensed mortgage agents and licensed mortgage brokers can trade in mortgages in Ontario. However, there are significant differences between the two professions.

While mortgage brokers can supervise mortgage agents, an agent cannot supervise a broker. Mortgage agents are limited on the disclosures that they can make to investors. Mortgage agents don’t hold mortgage brokerage licenses.

You should enlist the services of a certified mortgage broker because a broker understands the law and the relevant procedures. We will explain the mortgage process to you, help you determine how much you qualify for, shop around for the best mortgage deal and incentives like the First Time Home Buyer’s Tax Credit for you, and do mortgage pre-approval. Call us today to talk to one of our mortgage brokers.