This post will primarily be of interest the First Time Home Buyer & newer Realtors. (Pretty dry reading otherwise I fear)
The majority of Realtors will request that you are preapproved prior to them showing you properties let alone writing an offer on one. This is absolutely a practical position. There are often small things that can come up, such as unpaid parking tickets, which are far simpler to address without the deadline of a Subject removal clause looming. Never mind reversing the downward trend your credit score can have with such issues outstanding.
However a ‘preapproval’ is certainly not all the people believe it to be, as I have written about in the past.
Nonetheless here is the (relatively) complete step-by-step process from Preapproval to completion.
Step One – A Simple Mortgage Application
(a far simpler step than is expected)
A simple phone call to a skilled Mortgage Broker (i.e. 613 354-9037 or 1 877 333-4983 x760)
Most clients are unaware that 90% or more of their initial questions and an actual pre-approval (& 90-120 day rate hold) can all be completed by telephone. When I advise people of this during our first phone call I typically hear a great sense of relief on the other end of the phone line as most people’s lives are very hectic either with work, family, or play. Frankly, speaking there is no need to arrange a face to face meeting up front; there is plenty of time for that later in the process.
Within what is typically a 30 min. telephone conversation I get to know a few things about how the client thinks and operates. We also complete a mortgage application in a conversational process (faster and simpler than online or paper & pen) which typically allows me to advise my clients with 95% accuracy as to the maximum mortgage amount they qualify for. In addition to this I am able to send that complete application out to a lender instantly locking down a variety of mortgage rate options.
I do not like to ask my clients to fill out online applications, nor do I like to send them paper applications to print fill out and return to me. Ultimately the conversational approach appears to be preferred by the majority of my clients as well. The most skill testing question I ask is the clients’ SIN. Pretty well every other answer is top of mind and gathering a stack of documents up front is rarely required.
At the end of the application process I will send out an e-mail titled ‘documents’. This is a comprehensive list, tailored during our conversation, of the specific documents that a lender will request to complete a mortgage application.
With a complete application in the system, a Credit Bureau reviewed, and the lender locking in rates – the client is now ready to write their offer with confidence.
Writing the offer; My clients write offers not only with the confidence achieved with Step 1, even more importantly they write with “subject to the buyer receiving and approving satisfactory financing”
. Q. ‘But hey I thought I was pre-approved why bother with a subject to financing?’
A. Although you as an individual may be platinum plated, there remains a variety of other variables surrounding the property itself that can turn off a lender, thus going in condition free is never a prudent move. There are a few special steps that can be taken when there is no choice – it is something to discuss verbally on a case by case basis. As a general rule one never writes a Real Estate offer condition free!
Such concerns around the property itself include, but are not limited to;
a remediated grow-op, private transaction(non MLS), a non-arms length transaction (family),vendor take back financing, remediated drug lab, Lease land, First Nations Lease Land, Age restricted properties, special assessments (pending or otherwise), any reference to water or leaks in the minutes, any reference to “building envelope”, a ‘fixer upper’, insulation or wiring concerns, a commercial zoning component, livestock is present, etc.
An accepted offer;
Once we have an accepted offer we update the file with the subject property details and forward the application to the lender for immediate review. It typically takes 24 hours to receive the initial response, during that time we like to gather the last few outstanding documents from the client.
Within 72 hours we typically have a documented commitment back from the lender ideally with all conditions met.
Often there is an appraisal required; this is something that our office will set up for you, as we deal with these companies on a regular basis and will receive better service. The appraiser will contact the client to set up the actual appointment to view the property. Nearly all clients are unaware of this expense (~350.00 on average). The true advantage to the client is that their appraisal is done promptly and professionally by a trusted firm not only approved by the lender (every lender we work with) but more importantly highly regarded by each lender.
The broker’s collection of approval documents;
Just prior to waiving conditions is when the majority of my clients attend my office to review and sign off on a stack ranging from 14 to 22 pages of mortgage related documents. It is important to me that we take the time to work through these documents with a reasonable amount of attention and detail. It is important to most of my clients as well.
Once this final signed collection of documents is returned to the lender, with all conditions met, then the final documents are released to the lawyer’s office.
Signing at the lawyer’s office;
If you have a law office you currently deal with we can work with them to make your transacton happen or we can suggest a law firm that we work with on a regular basis, upon your request.
For standard transactions the process is extremely smooth 99.9% of the time. We are working diligently on that 0.01%.
Hopefully this has brought some clarity to the steps involved in mortgage financing for your first purchase transaction.