Once you’ve received your pre-approval and your offer on a home has been accepted, it’s time to apply for a mortgage! Keep in mind that your offer to the seller will be “subject to financing,” meaning that the offer depends on whether or not you are able to obtain the mortgage financing from your lender. In some cases, there are additional conditions that must be met in order to satisfy the offer – conditions like a satisfactory home inspection. It is also important to remember that there will be closing costs involved with your purchase, which are sometimes easy to overlook when you are budgeting for your new purchase. See here for a more detailed description of closing costs, including what the costs are and how much you can expect to pay.
At this point, there are some documents that you will be required to supply in order to satisfy the lender’s financing requirements. Some of the more common items are a letter of employment, your most recent paystubs, and bank account statements to confirm that you have the down payment available in your account. In the event that you are being gifted the money for your down payment, a gift letter will also be required.
In the case that you are putting down less than 20% for your down payment, you will require something called ‘mortgage default insurance.’ In Canada, the primary insurance providers are CMHC, Genworth, and Canada Guaranty. To learn more about mortgage default insurance, see our FAQ’s on Mortgage Insurance. You can also use our online calculator to determine how much your mortgage premium would be – simply plug in the asking price of the home, your amortization period and interest rate and we’ll calculate the premiums for you! Keep in mind that you do have the option to pay your mortgage default insurance up front, but most people choose to have the premium added on to their mortgage instead.
If you have any questions regarding applying for a mortgage, or would like to schedule a complimentary mortgage consultation, contact us today! Be sure to check back next week for a detailed explanation of what you need to do after you’ve applied for a mortgage and how your purchase is finalized.