FAQ

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A Mortgage Broker is an individual who has access to a wide variety of mortgage lenders. Considering that every situation is slightly unique, it can be a relief knowing that if bank A says no to your application that there are many more the mortgage broker can present your application to without you having to make appointments with each. They take the application and gather all the necessary documentation for the mortgage lender. They submit to the lender they see as having the best product for you and work as a go between you and the lender until they know you have the full approval for the mortgage. Mortgage Professionals can help ease the mortgage process for you through ongoing support, side-by-side product comparisons, help with credit improvement, access to competitive rates/discounts, advocating for better terms and providing tailored options for your finances.

Obtaining mortgage financing can be very confusing especially since the rules are constantly changing. Knowing the basics and what to expect along the way can take away some of the pain so we are going to do a quick rundown of the whole thing. 

The application – At this point you are going to answer all sorts of questions about yourself. Lenders are looking to find out just who you are before they loan you a whole bunch of money.

• Employment – They need to know all the particulars including how long and how you get paid. If you are self-employed, commissioned or regularly receive bonus or overtime they will want to see a 2-year history before they will allow this income to be used to qualify you for the mortgage.
• Credit Bureau – Consider your credit history as a sort of report card if you will. You need to show that you have managed your current debts obligations satisfactorily. Lenders are looking for a 24-month history on 2 types of credit such as a credit card and a vehicle loan. Keep in mind that late payments on your cell phone, cards, loans or even a previous mortgage better have a very good reason.
• Assets – More and more lenders want to see that you have a safety net of some additional savings just in case.

So you have completed the application and now it’s time to verify all of the information. A few bad eggs have wrecked it for the rest of us so you are going to be asked for a lot of paperwork. Mortgage fraud is huge and the lenders are accountable to the mortgage insurers, OFSI, and to their investors so you better bet they are going to verify until they are satisfied. Here are some of the things you will have to provide:

• Letter of employment outlining all the particulars and a recent paystub
• Last 2 year’s Notice of Assessment from the CRA and proof that all tax bills have been paid
• 3 month history on all accounts you are using for the down payment with explanations of any large deposits
• Mortgage statement, property tax bill and lease agreements on any other homes you own
• You may also be asked for T1 Generals and Business Financials if you are self-employed
• Various other documentation as required

So your mortgage lender has approved the documentation you have provided and you are having a look at the paperwork in front of you before you sign on the dotted line. A few great questions to ask are:

• What are the pre-payment privileges on my mortgage and do I have to wait for the first anniversary to make the extra payments?
• Is my mortgage portable across the country and to a wide variety of properties? How long do I have to port this mortgage? Porting is where you can take the mortgage from one house to another without penalty. Some lenders do not lend on rural properties for example and so if an acreage is in your future then you want to make sure yours does. Other lenders require the port to happen on the same day which can be trick to navigate.
• How are the prepayment penalties calculated? In Canada, there is no rule about how a lender has to calculate this number. We have seen them vary from $3,000 to $18,000 on the exact same mortgage amount with the only difference being the lender. Life happens and you want to make sure that if you have to break your mortgage that it will not cost you all your hard earned equity.

And now that you have asked your questions and met all the conditions you are off to the lawyer for the final signing. There are a few costs you need to anticipate:

• Mortgage Insurance – If you are purchasing a home with less than 20% down you will have to pay this which is based on a set percentage of the purchase price depending how much you are putting down and is added to the mortgage.
• Legal Fees – The lawyer will have to complete the final paperwork and register the mortgage for you and this can cost up to $1,750 
• Title Insurance – Many lenders now require this in lieu of an RPR – The cost is about $250 and will be collected at the lawyer’s office.

The level of documentation which is required for the average mortgage these days can be very frustrating. It can seem endless and very nitpicky and annoying because we are able to purchase a vehicle with just a paystub. There are a few reasons for the increased documentation requirements. The first is that the banks are mandated by the Anti-terrorism Act to make sure all funds are legally sourced. Criminal organizations do exist even here in Central Alberta and they are clever and will launder their funds however they can. I had the opportunity to attend an anti-fraud session led by the Edmonton police and he told a story of how a routine bylaw infraction led to the discovery of a criminal enterprise which involved more than 32 million dollars in mortgage fraud. Police resources, insurance proceeds, court time and on and on mean there was a genuine cost to the greater community. Increased due diligence prior to funding can help catch such things ahead of time. The second is that your banks and mortgage lenders are accountable to the mortgage default insurers and their company’s investors and shareholders and to OSFI which oversees them all. If you default on your mortgage they have to be able to prove that they took every step possible to ensure you were in fact a solid borrower qualified for the mortgage. Honestly, it boils down to this. If you were lending someone $350,000 wouldn’t you want to make sure they could afford to repay you?So back to down payment sources. When you are providing documentation for your mortgage it is going to have to be pretty clear. It will have to show your name, financial institution holding said asset, account number and all transactions into the account for the past 90 days. Any deposits over $500 will have to be properly accounted for as per the above rationale. A quick reminder that you will have to have at least 5% to put down and an additional 1.5% for the closing costs so 6.5% all together though these days the banks and the mortgage insurers really like to see additional savings just in case you experience a job loss or illness. Here are the most common and acceptable down payment sources and how each is to be verified. Keep in mind that you can use a combination of them but you will have to provide verification of each.

1. Savings – All accounts will need to be verified via a 90-day history.
2. TFSA – Must be verified via a 90-day history.
3. RSP – Will require a 90-day history and in most cases verification that the funds have      been redeemed via the forms to the RSP provider and have been deposited into your account.
4. Gift – From an immediate family member. Need to see a signed gift letters stating it is in fact a gift which is not expected to be repaid and proof it has been deposited to your account. In some cases they will want to see the source of the gift which means a statement from the person giving you the funds.
5. Loan – You can use borrowed funds for your down payment through certain lenders. They will need to verify the terms of the loan if it is new to make sure you can afford both it and your mortgage.
6. Credit Card/Line of Credit – This is similar to the loan as above but in this case you usually only have to prove you can afford the payments for both.
7. Sale of Asset – You can sell anything you own but make sure you document it properly. Bill of sale, copy of the cheque and proof it has been deposited to your account.
8. Gifted Equity – If you are purchasing the home of a family member and they wish to, they can gift you the equity in the home and this can be used as the down payment.
9. Inheritance – This is usually verified via the documents from the lawyer with corresponding deposit to your account.

First Time Home Buyer:

1. Most recent pay stub
2. Letter of Employment – on company letterhead, detailing length of tenure, job title, rate of pay, guaranteed number of hours
3. Last two years T4s
4. Last two years Notices of Assessment from the Canada Revenue Agency – with the most recent year showing no taxes outstanding
5. Bank Statements – 90 days’ worth of statements from each account that down payment funds will be drawn from – please ensure that all accounts show your name and account number clearly at the top and that they are unaltered
6. If down payment is to be gifted, please send in a statement showing the account number, name and corresponding deposit, to line up with the amount on the gift letter. Letter will be forwarded to you once a lender has been chosen, as each lender has a specific letter.

Self-Employed:

1. Articles of Incorporation
2. Last two years of accountant prepared company financials
3. Last two years Notice of Assessment – with the most recent year showing no taxes outstanding
4. Last two years complete T1 Generals
5. Most recent Mortgage Statement from current home
6. Property Tax Assessment from current home
7. Most recent Mortgage Statement from current home
8. Property Tax Assessment from current home
9. Rental agreements from all rental properties
10. Bank Statements – 90 days’ worth of statements from each account that down payment funds will be drawn from, if not all down payment will be coveted from the sale of your current home – please ensure that all accounts show your name and account number clearly at the top and that they are unaltered
11. If a portion of the down payment is coming from a gift, please provide a bank statement with the gift amount being deposited, to correspond with the gift letter. Gift letter will be forwarded to you once a lender has been chosen, as each lender has a specific letter required

If You’re Selling and Buying a New Home:

1. Most recent Pay Stub(s)
2. Letter of Employment(s) – on company letterhead, detailing length of tenure, job title, rate of pay, guaranteed number of hours
3. Last two years’ Notice of Assessment – with the most recent year showing no taxes outstanding
4. Most recent Mortgage Statement from current home
5. Property Tax Bill from current home
6. Most recent Mortgage Statement from all rental properties
7. Property Tax Bill from all rental properties
8. Rental agreements from all rental properties
9. Bank statements – 90 days’ worth of statements from each account that down payment funds will be drawn from, if not all down payment will be covered from the sale of your current home – please ensure that all accounts show your name and account number clearly at the top and that they are unaltered
10. If down payment is to be gifted, please send in a statement showing the account number, name and corresponding deposit, to line up with the amount on the gift letter. Letter will be forwarded to you once a lender has been chosen, as each lender has a specific letter
11. If you are self-employed please also provide last 2 year’s full T1 Generals and Financial Statements

If You’re Switching to a New Lender:

1. Most recent pay stub(s)
2. Letter of Employment(s) – on company letterhead, detailing length of tenure, job title, rate of pay, guaranteed number of hours
3. Last two years’ Notice of Assessment – with the most recent year showing no taxes outstanding
4. Most recent Mortgage Statement from current home
5. Property Tax Bill from current home
6. Most recent Mortgage Statement from all rental properties
7. Property Tax Bill from all rental properties
8. Rental agreements from all rental properties
9. Home Insurance policy

On Top of the Above, You May Be Asked for Additional Items Such As:

1. Complete Divorce or Separation Agreement
2. Proof of collections paid
3. Void cheque for the mortgage payments