Needing A Mortgage? Learn About What Information The Lender Requires On The Initial Application

The time to purchase a home is right. You feel ready to make the leap from mere newspaper ad voyeur to all out search enthusiast - one that first requires you finding a suitable Real Estate Agent to assist in what is a very complex undertaking. But, before you begin heading out to view select properties with your Agent you must first look into your affordability, and whether or not you can qualify for a mortgage. What is your upper price limit on a home for you and your family? What is comfortable in terms of payments can you realistically afford? You don't want to become to financially over-stretched that you barely get into your new home then realize you can't afford to furnish it or even buy groceries. In checking your affordability it is best to do it at a financial institution rather than on-line. Doing it on-line is merely a guide. By speaking with a financial advisor in person means everything (income stream, outstanding loans, etc.) is verified and any questions you may have fully answered.

What Is A Mortgage?

A mortgage can simply be viewed as a loan; one in which your home, condominium or commercial property acts as the collateral for that loan. The Lender advances you the funds on closing and you - the borrower - agree to pay the monies back - with interest - over a mutually agreed upon period of time. If payments are missed and you default on the loan then the Lender has the right to initiate 'Foreclosure' or 'Power of Sale' proceedings.

Where To Obtain A Mortgage

There are many places to obtain a mortgage. These can include financial institutions (banks), credit unions, insurance companies and trust companies. As well, there are private lenders and they can be found through newspapers and oftentimes friends. If you a buying new construction the builders themselves may offer assistance.

Mortgage Application Information Required

As mentioned above it is best to actually go to the lender of your choice rather than doing it on-line. Lenders assess your ability to pay and outline the structure of those payments. The following is a list of information that may be required in order to secure your loan. Consider it a partial one; your lender may ask for more depending on that institution's requirements.

1. Details of your employment record as well as proof of income. If self-employed then you must provide a 'Statement of Earnings'.

2. A list of your current assets. (i.e. property, cars, RRSP's, bonds, etc.)

3. An in-depth and detailed list of your liabilities. (i.e. car loans, credit card debt, unpaid taxes, etc.)

4. An outline of any Mortgage insurance fees that need to be paid if you are trying to obtain a high-ratio mortgage. (*see below*).

5. Personal information. (i.e. marital status, dependents, etc.)

6. You will probably be asked to consent to a credit check. This is very important to the bank and a bad rating could eliminate any chances for a mortgage. It should be noted that you can check your own credit rating to make sure it is in good standing. You can do this at: http://www.equifax.ca. I would recommend doing this first so that if any problems are discovered they can be addressed before the bank checks your credit score.

7. The Lender will also want to verify the amount of your down payment and its source. (i.e. your savings, family gift, etc.) Your down payment cannot be another loan.

If they approve you for a mortgage it means they are willing to advance you the funds on closing. It is still not a guarantee. Once you purchase a home then you must give them the 'Agreement of Purchase and Sale'. They will view the property details and undoubtedly have it appraised to check value. It is best to put a condition in the Offer that will allow a few days for this process to happen.

*CMHC'S Mortgage Loan Insurance*

Canada Mortgage and Housing Corporation loan insurance protects the lender (i.e. bank) if you default on your mortgage. If you place 20 per cent down on the purchase price then this a conventional mortgage and CMHC is not needed. But if you put down less than this amount then an insurance premium is added (pro-rated). The premium CMHC charges is usually rolled into the mortgage and paid off over time. Due keep in mind there is tax on this premium that must be paid up-front. For more information and a list of approved lenders visit: http://www.cmhc-schl.gc.ca/en/co/moloin/index.cfm

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