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 that purchase a home cannot afford to pay for it with cash up front and thus require a mortgage. Who has an extra $400,000 in cash in their bank account that they can immediately put towards purchasing a home?!

In the competitive, modern, housing market of multiple offers and options, 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 on the basis of failing a technicality.

Applying for a mortgage is advisable even before you start to shop around for a home. Being pre-approved for a mortgage in Canada will also help you define your prospective house elements by knowing your purchase budget. Our easy-to-use Mortgage Affordability Calculator will help you compute what amount of 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 could revise your price expectations down instead of wasting time shopping around for a property that you cannot afford.

Though it’s nice to look at mansions, most people just cannot afford to live in a mansion, which is why knowing exactly how much you can afford can be an empowering part of the home buying experience.

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 a few other variables, the lender will calculate debt servicing ratios and verify the applicant's credit score to determine whether a pre-approval will be issued.

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.

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6 steps you must go through 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 - income confirmation, down payment confirmation, purchase agreements, etc.
  3. Select a mortgage product - term, 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. You might be interested in reading our comprehensive guide on buying Mortgages to learn more about buying a mortgage product in Canada
  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 really it’s not. 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 is there to safeguard your interests as well as your lender’s interests. Since you’re researching, why not also compare mortgage rates to get a better understanding of the current mortgage market.

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You made an offer on a property - now what?

You have your mortgage pre-approval in hand and make 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 for 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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