When we are contemplating buying a home, or in the process of doing so, most of us will need a mortgage.  Let’s have a look at:

•  Who do you go to?
•  What does the process look like?

Okay, let’s begin.  Who do you go to?

Start with asking friends, family, and colleagues if they can recommend a good mortgage broker, someone who may have helped them with their mortgage.  Once you have asked for a few recommendations, pick one,  give them a call or send them an email, whichever you prefer.

What does the process look like?

You will meet with your mortgage professional who will ask you a few questions to determine what are your goals and dreams of home ownership. Then they will ask you a bunch of personal financial questions.  Sometimes all these questions can seem so….yeah…. personal.   It may even feel awkward to reveal all this information and possibly you are thinking why?  Maybe the next bit will help satisfy the why.

Lenders follow something called the 5 C’s of credit.  These questions that you are being asked by your mortgage professional,  revolves around the 5 C’s.  Here is a quick review of what they are:

Credit History – quite simply it is a history of your credit.  What you have borrowed and what is still outstanding.

Capital:  Capital refers to your net worth.   How much have you saved for your down payment along with other assets, investments or cash you may have minus what debt you have outstanding.

Collateral : the house you purchase will be held as collateral for  the mortgage funds you will borrow meaning the mortgage amount will be registered against your property.

Capacity: this determines your ability to pay.  A basic guideline that is used for this is a percentage of your gross income.  For example your housing cost should not exceed 30 – 32% of your gross income and your total debt payments should not exceed 40- 42% of your gross income

Character:  Will you, the client be willing to repay the mortgage?  A review of how well you have managed your credit as shown in your credit report, how long you have worked at your job or industry, how long you have resided at your home or rental places.

The lender would like some assurance of who they are lending the money to and that they will be repaid, and you the borrow want to ensure it is something you can afford and pay back.

Now some of you may stop reading here because you have bruised credit or you are self employed etc.  Don’t stop!  If you have a desire to own real estate your mortgage professional  can walk you through options that may work for you.

Once you have provided answers to the questions, you will be asked to provide paperwork to verify your income, your money for down payment, your money for closing costs and there may be other verified paper requirements depending on your personal situation and the home that you are planning to buy.

After the application has been completed, your mortgage professional will send it to a lender to have it approved.  The best part is once you have provided the answers and paperwork, it is your mortgage professionals job to find you the best product.

Yes, you have been approved! Now what?  You will be asked to sign documents and submit any other paperwork requirements.   Once all the paperwork with your mortgage professional has been signed, they will forward it to the lender who will then forward it to your lawyer for completion.

Even though this is a basic overview of the process, I hope it has provided some clarity to you as to what to expect when you are looking for a mortgage.

Marg DeBoer        www.deboermortgages.ca       marg@deboermortgages.ca