8 Steps to a Mortgage

Understanding the Mortgage Process When Purchasing a Property
what happens  •  what to expect  •  what is expected of you


     Step 1Equity
The down payment is known as the purchaser’s initial “equity” in the property.  If the equity is less than 20% of the purchase price of the property, the lender is going to require mortgage insurance. This is known as default insurance and its purpose is to protect the lender.


     Step 2Be Prepared
Get All Your Documents Ready

What to Prove

What You Need

Description of Property Being Purchased Copy of the Agreement of Purchase and Sale

Identification 2 pieces of ID (1 piece must be photo ID)

  • 2 most recent paystubs
  • 2 most recent Notice of Assessments

Employment History
  • Current employment letter
  • 3 years of employment history

If Self Employed
  • Confirm self employed status
  • 3 years tax returns

Assets List of assets including:

  • Value of any other real estate
  • Cash in bank
  • Vehicles
  • Investments (RRSPs, stocks, bonds, etc.)
  • Any other assets

Liabilities List of liabilities including balance owing and monthly payments

  • Mortgages on any other real estate
  • Any loans
  • Credit cards
  • Child support/alimony

Proof of Insurance Binder letter from insurance company

     Step 3The Application
Signing the Mortgage Application

When signing the mortgage application, you are verifying the information that will be submitted to the lender.  Your signed authorization to obtain a credit report is also required.  The lender uses your credit history to determine your creditworthiness.  It shows your history of borrowing and repaying money.


     Step 4Processing
Your Application Is Processed and Submitted To the Lender

This is when the mortgage professional reviews your application and credit report.  The information is transferred to an electronic version and submitted to the underwriter of the lender that will (hopefully) approve your mortgage.
You may get a call during this time for more information. This is not a sign that there is any trouble with your application, they want to be sure everything is just right to make the rest of the process go faster.


     Step 5Underwriting
Your Application Is Reviewed by the Lender’s Underwriter

The lender’s underwriter reviews the application and the documents which are submitted.   The underwriter makes the decision as to whether or not your application is approved.
The underwriter will want to know the value of the property.  In many cases an Automated Property Valuation (“APV”) is used.  An APV is a residential valuation report that comes from analysis of public record data and computer decision logic combined to provide a calculated estimate of a probable selling price of a residential property.  If a property is not eligible for APV or the APV does not return a valuation, a full property appraisal may be a condition of approval.


     Step 6Additional Information
The Underwriter May Require Some Additional Information

  • At times, additional information may be requested in order to make a decision.  Some examples:
    Verification of Employment from your place of work, a statement from your bank that the funds on your bank statement are still in the bank.
  • Explanation letters explaining payments that you have made late and why this occurred or perhaps a letter explaining a gap in your employment history. If you know that these things have happened, an explanation up front at the application meeting will allow your mortgage professional to draft an explanation to submit with the application.
  • Conditions that take the most time are those clearing up past collection accounts that have been paid or need to be paid in order for the mortgage to be cleared to close.


     Step 7Commitment Letter
The Commitment Letter Is Issued By The Lender

Upon approval by the underwriter, a written commitment is issued by the lender.  It may require certain conditions be met before the contract can be finalized.  The commitment letter will outline the basic terms of the mortgage which, when accepted by the borrower, forms a binding contract.


     Step 8Closing
The Closing Process Can Proceed

The lender will prepare the mortgage loan documents and forward them to your lawyer.  Your lawyer will also receive instructions from the lender on how the loan is to be documented and the funds disbursed.  Your lawyer will complete all instructions and ensure all necessary documents are signed and recorded.
There are costs associated with closing, approximately 1.5% of your purchase price.  You may be asked to show that you have these funds in your bank account and the lender may ask for a bank statement showing such.