Mortgage Approval Process

Your guide to the mortgage approval process.

Get to know the mortgage approval process in Canada

Learn about the mortgage approval process in Canada and what information you need to provide to your lender in this handy guide. Yes, there is a process. Yes, you and your lender will be following it step-by-step on your journey to home ownership. And yes, we can help you navigate it all!

The vast majority of people who purchase a home cannot afford to pay for it upfront which is why they require a mortgage.

In the competitive housing market where multiple offers are common, you should strongly consider being pre-approved for a mortgage so that you can position yourself as a competitive (and possibly the top) bidder on the property. Technically, a mortgage is not required until the property is purchased. However, you don’t want to lose your dream house due to not being approved for the required mortgage.

Applying for a mortgage is recommended even before you start to shop around for a home. Our easy-to-use Mortgage Affordability Calculator will help you determine how much mortgage you can afford based on your household income, debt, and your proposed property details.

The mortgage pre-approval

A mortgage pre-approval can help you figure out the value of the home you can afford. Without a pre-approval, your expectations and reality might not align. A mortgage pre-approval is similar to a regular mortgage approval, but it may exclude specific information about the property. If you're thinking about purchasing a home in the $500,000 range and have $50,000 saved for a down payment, a pre-approval would tell you whether you would qualify for a $450,000 mortgage. If you find out that you don't, then you can lower your price range, or spend more time saving up the required down payment for a larger mortgage.

What information will a lender require for a pre-approved mortgage?

For a mortgage pre-approval, the mortgage representative will ask for:

  • Estimated Mortgage Amount
  • Estimated Down Payment Amount
  • Income
  • Monthly Obligations (i.e. credit card, car loan, etc.)

What does the information you provide to a lender do for the mortgage pre-approval process?

Based on your estimated mortgage amount, down payment and some other variables, the lender will calculate debt-servicing ratios and verify your credit score to determine whether they can issue a pre-approval.

The mortgage representative will often rely on the accuracy of the information provided by the applicant without asking for supporting documentation to verify it since the mortgage pre-approval is not a binding agreement. To ensure that the mortgage pre-approval is as accurate as possible, however, it is important to be honest when the mortgage representative asks you for specific information. It saves both you and the lender time and energy.

Once pre-approved, you will be issued a pre-approval certificate with a rate hold guarantee from 30 to 120 days. Having the mortgage rate guaranteed for the specified term, even if rates rise, is a substantial benefit of the mortgage pre-approval process. Thus, pre-approvals are very popular in a rising interest rate environment. If rates drop during this time period, you will still be able to take advantage of the lower rate.

6 steps to finalize the mortgage loan:

  1. Provide updated information for the mortgage application – mortgage amount, down payment amount, income, monthly obligations, etc.
  2. Provide supporting documents – proof of income, down payment confirmation, purchase agreements, etc.
  3. Select a mortgage productterm, fixed vs. variable, open vs. closed, mortgage vs. HELOC
  4. Mortgage approval – the lender will verify your updated debt ratios and credit score to determine whether you meet the qualification requirements.
  5. Sign lender documents – Upon approval, you will be required to sign mortgage documents outlining the mortgage loan details provided to you by the lender
  6. Sign legal documents – Instructions will be sent to a lawyer of your choice to prepare the final legal mortgage documents that transfer property ownership to your name

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The mortgage approval process in Canada may sound complicated, but it doesn't have to be. Follow the steps to successfully obtain the best mortgage in Canada for yourself and your property. The mortgage approval process is important to follow because it safeguards your interests as well as your lender’s interests.

You made an offer on a property - now what?

You have your mortgage pre-approval in hand and have made an offer on a property. What is the next step in the mortgage process in Canada? Hopefully the offer you made on the property had a financing condition. This clause gives the potential buyer time to obtain mortgage financing before the sale is finalized. If the potential buyer cannot get approved for a mortgage during that time the sale will not go through.

What information will you and your lender discuss when you have made an offer on a home and it has been accepted?

Once you found your ideal home and made an offer, you're ready to go through with a mortgage application. You then meet with the mortgage representative that issued the pre-approval and provide an update on:

  • Mortgage amount
  • Down payment amount
  • Income
  • Monthly obligations (i.e. credit card, car loan, etc.)

An update needs to be provided on the items that have changed.

Does the mortgage application now look completely different than the original one at the time of your pre-approval?

If so, the original mortgage pre-approval becomes irrelevant–aside from the rate hold guarantee that you're hopefully taking advantage of.

The mortgage representative will now ask you for exact property details (address, property taxes, closing date, etc.) and verify your credit score once again to ensure it has not significantly gone down since the pre-approval.

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