Becoming a homeowner is the ultimate dream and an important milestone for many Canadians. However, whether you are buying a house, a townhome, or a condo, you will more than likely be required to obtain a mortgage approval.
While the mortgage process in Canada may seem complicated, fear not: at Jason Anbara Mortgages, we can help you navigate the complexities of the mortgage approval process and get you one step closer to your dream of owning a home. In this article, we will discuss how long mortgage approval takes and the factors that may affect its timeline.
Setting the Stage
Whenever you are looking to buy a home, you will more than likely be required to take out a mortgage on it to cover the purchase price. Mortgage approval is the process of securing this mortgage financing, either by interacting with a lender directly or by working with a professional mortgage broker.
Understanding the Mortgage Approval Process
When it comes to securing mortgage financing, working with a broker offers numerous benefits, including an increased likelihood of approval and lower interest rates. Generally, you can expect to go through the following steps before receiving your funds.
1. Initial Consultation
The first step for mortgage approval is the initial consultation with your mortgage broker. During this in-person or over-the-phone meeting, the broker will analyze your financial situation, estimate your potential mortgage amount, and identify any roadblocks that may arise along the way. At the end of this meeting, you should have a clear understanding of what the mortgage approval process will look like and what results you can expect at the end.
2. Mortgage Pre-Approval
Next, your mortgage broker will ask you to supply several documents to ensure that your financial situation aligns with what was discussed earlier. Most brokers will provide you with a personalized document checklist, a mortgage application, and a privacy consent form.
Once the broker receives all the necessary documents, they will pull your credit bureau report, review your debt profile, and create a file that paints a detailed picture of your current financial situation. Based on the above information, the broker will compile a list of lenders that could be a good fit for your mortgage application.
3. Application Submission
The most important step of your mortgage approval journey begins here: mortgage application submission and approval.
Once your mortgage broker identifies the ideal lender, they will submit your application and the supporting documentation. On the lender side, a mortgage underwriter will review the application to determine the risk associated with lending money to you. Underwriters typically look at factors like the applicant’s income, credit history, available down payment or equity, and property value.
4. Mortgage Approval
If the mortgage underwriter determines you are a low-risk borrower, they will approve your application. For riskier applicants, the lender may offer higher interest rates or decline the application altogether. If your application gets rejected, do not worry: your mortgage broker can always resubmit the application to a different or alternative lender.
Once the underwriter accepts your application, your mortgage broker will receive a “conditional commitment,” which means that your mortgage is approved given that you meet certain conditions. Such conditions may involve providing proof of income, a letter of employment, and property details.
5. Finalizing the Paperwork
After you receive the approval, ensure that you notify your lawyer and real estate agent as soon as possible. They should take care of all the necessary documentation to prepare and register the mortgage and transfer the property title to you. The final step involves meeting with your lawyer to sign the relevant documents and providing a down payment and closing costs.
6. Funds Disbursement
Once everything goes through, the lender will disburse the funds to your lawyer’s trust account, who will transfer them to you. The home purchase will be complete as soon as the lawyer and the real estate agent finalize the documents!
Pre-Approval vs. Full Approval
While getting a mortgage pre-approval is an important step towards securing mortgage financing, remember that a pre-approval is an estimate, not a promise. It is a quick, non-binding document that states that you are eligible for a loan up to a certain amount based on unverified information that you provide about your financial situation.
On the other hand, mortgage approval is a lengthy process of obtaining a specific loan on a specific property at a particular interest rate. Mortgage approval takes considerably longer than a mortgage pre-approval, as it involves a complete verification of your information and information about the property being purchased.
Documentation Requirements
While the exact mortgage approval documentation requirements may vary from lender to lender, in most situations, you will need to provide the following categories of documents:
- Government ID: Your mortgage broker and lender must verify your identification. As such, you will be asked to provide a copy of your government-issued ID and your SIN number.
- Proof of income: You will also need to provide proof of your income, such as recent pay stubs, a Notice of Assessment, T4 or T4A tax forms, a T1 general tax form, and/or a letter of employment.
- Basic financial information: The mortgage broker will need to pull your credit bureau report to verify your credit score and debt history. They will also ask you to provide your recent bank statements and a full list of your assets and investments.
- Proof of down payment: Naturally, lenders will need to ensure you have the funds to cover the down payment. Depending on where these funds are coming from, you may need to provide a statement of savings, the sale agreement of existing property, a gift letter, or RRSP withdrawals.
- Property details: The lender will also need to see the specs for the property you are buying. Some documents you may be asked to provide include the final purchase and sale agreement, MLS listing, homeowners insurance policy, lenders’ title insurance, legal description of the home, and more.
Timeline Expectations
While mortgage pre-approval can be completed as quickly as in one day, the full mortgage approval could take as long as a month. On average, you can expect the entire mortgage process in Canada to take roughly two weeks to complete, depending on various factors, most of which will be beyond your control.
Factors Affecting Mortgage Approval Time
Some factors that affect the exact mortgage approval time include credit score evaluation, income verification, property appraisal, and, of course, the loan type and the lender.
- Credit score evaluation: Whenever you apply for a mortgage, the lender will first review your credit report. While there is no specific credit score you need to hit to secure mortgage financing, applicants with higher credit scores typically enjoy lower interest rates and faster approval times.
- Income verification: Before extending mortgage financing, the lender will need to ensure you can pay them back. Income verification should be simple if you can provide recent paystubs and a letter of employment. For self-employed individuals, this step may take a bit longer.
- Property appraisal: The lender will also need a property appraisal before approving your mortgage application. Some lenders perform full appraisals, while others choose to go with quicker, drive-by appraisals.
- Loan type and lender: Finally, the specifics of your loan and the lender you are working with will significantly impact the duration of the entire mortgage approval process.
Working with a Trusted Mortgage Broker
With any mortgage process in Canada, a lot is on the line. That’s why working with a reliable mortgage broker is paramount. At Jason Anbara Mortgages, we understand that how long a mortgage approval takes depends not only on the lender but also on the skills and experience of your broker. Streamlining your mortgage approval process, we have access to various lenders with the best loan products tailored to individual situations. Connect with us today to schedule your initial consultation.
