Buying your first home is a big event in your life. It is likely your most significant purchase and it involves a lot of time and many decisions. This brief article, and related posts, help you prepare for each step in the financing process.
What are the Steps for Getting Mortgage Financing?
Once you’ve made the decision to buy, it’s time to see how much of a mortgage you can qualify for. An important step is to get a Pre-Approved Mortgage before you start house shopping. This article will help you understand everything about Pre-Approved Mortgages and Interest Rate Guarantees.
With your Pre-Approval in place, the next step is to find a good realtor and start looking for a home. It’s also time to decide on who you want to deal with for your mortgage financing. There is so much information about mortgage rates, which is very important, but just as important for your first mortgage is dealing with someone who is knowledgeable and can make the process go smoothly for you. Choose the mortgage lender you are going to deal with based on rate, service, rate guarantee, and any features of the mortgage that may be important to you.
I can’t stress enough how important it is to have a knowledgeable mortgage lender who provides quality service. Once you make an offer to purchase, things move quickly. You don’t want to be dealing with someone who takes a week to return a call or email. Do a service level “test”. Call or email the lender with a few questions to see how long it takes them to respond. If they don’t get back to you within 24 hours or can’t answer your questions, deal with someone else.
Offer To Purchase
When you find your dream home you will make an offer to purchase. Your realtor will guide you through this process and just remember to make sure that the offer contains a clause stating that the purchase is subject to financing. Also make sure that there is sufficient time for the mortgage approval process to take place.
When it’s a sellers market and homes sales are moving quickly there will be a push to have a quick approval and mortgage closing date. Don’t get rushed into this because the process for the final mortgage approval and closing takes time. If you can’t meet the conditions removal date on your offer then your sale could fall through. Even if you have a pre-approved mortgage, you still need to get a formal mortgage approval and a property appraisal. The time to complete an appraisal varies in locations across the country; it can take anywhere from a day to a week.
Five business days is a good benchmark for time to get conditions removed. Keep in mind that this is business days, so if you make an offer to purchase on a Sunday or long weekend add extra days.
Prepare for your Appointment
When you make an offer contact your lender right away. Set up an appointment and ask what you need to bring to that appointment. If you have a pre-approval you should have provided all of your asset confirmations and income verification already but there may be a few things that were left outstanding. It’s important to have everything required so that your lender can quickly finalize everything for you.
When you see your mortgage lender for this next appointment you will provide the offer to purchase and any other information required. At this time you want to review the terms of your mortgage, the amount, the interest rate, term of the interest rate, mortgage amortization, payment frequency, how your property taxes will be collected and any other conditions of the mortgage.
This is also when you will make a decision on Mortgage Insurance. Here’s some information on mortgage insurance to help you with this. If you’re feeling overwhelmed with all the decisions you’ve had to make with regards to your home purchase and mortgage and aren’t certain whether you want the insurance coverage here’s what I recommend- take the insurance and set a reminder to review it in a month. It won’t cost you anything if you cancel it within 30 days.
You should also choose a lawyer at this time and provide your mortgage lender with the name and contact details for your lawyer.
The Clock is Ticking for Conditions Removal
Your offer to purchase will have one or more conditions that need to be met before the purchase of your home is finalized. I mentioned previously that one of these conditions is that the offer to purchase should be subject to financing. Your offer will contain a date for when that subject to financing condition needs to be removed. The day you make your offer, the clock starts ticking to get the conditions met. That’s why you need to provide your mortgage lender with everything they need to finalize your mortgage, get an property appraisal ordered, and communicate financing is in place to the realtor prior to the condition removal date.
Ask your lender to keep you informed while they work through the approval process. They should give you a call or send an email at each stage so that you can be assured you will have an approval by the due date. Here’s what you want to know:
- You want a confirmation that your mortgage financing is approved, subject to an appraisal. Get the details of the approval in writing; the amount, rate, term, payments and closing date. Also, a confirmation that the property appraisal has been ordered.
- Next, a confirmation that the appraisal has been received and what amount the home is valued at. If the appraised value is less than the purchase price, adjustments to the mortgage amount will be required. (refer to the pre-approved mortgage post for further information). You will now have a final approval. Confirm that your lender has advised your realtor that the financing condition has been met.
- Once you have a final approval, set up an appointment with your lawyer. Let your mortgage lender know so that they can issue the mortgage instructions to the lawyer in advance of your appointment so that the lawyer can draw up your mortgage documents.
- Have your lender confirm that they have sent the mortgage instructions to the lawyer.
Appointment with your Lawyer
When you go to your appointment at the lawyers be sure to review the details of the mortgage documents before you sign anything. It’s a good idea to have the emails from your lender handy to confirm all the details. The lawyer will also review your property taxes – pay attention to any action you may have to take with regards to your taxes. If the bank is collecting the property taxes with your mortgage payment then they will be responsible for paying the taxes. If the bank is not collecting the taxes then contact the city office and set up monthly payments.
You will need to provide your lawyer with the down payment at this time so make sure you have a cheque or bank draft. You will also need your proof of property insurance.
Now your part is done! Your lender and lawyer will work together to have the mortgage set up and funds transferred to the seller.
Final Step: Move into your new home and enjoy!! Congratulations, you are now a Home Owner!
I welcome your comments and questions, and please share this if you have found the information helpful.