Hi, I’m Moe, a Mortgage Agent and Co-Founder of Palm Mortgages.Today, I wanted to discuss the mortgage application process.
I’ve had clients who are under the impression that it’s a very time consuming and rigorous process, and others who think it’s as simple as applying for a credit card. The truth lies somewhere in the middle.
The process generally comprises of four major stages: application, underwriting, approval, and closing.
At Palm Mortgages, the work starts when a client first reaches out to us and we enter the application stage. We book a free 30 to 60-minute consultation (usually closer to 60 minutes) where we get a sense of who the applicants are, how they generate their income, their overall financial situation (i.e., what their current financial obligations are and how much they can afford to pay towards a mortgage), and what it is exactly that they’re looking to do (e.g., is this a purchase? Refinance? Mortgage transfer?). It is crucial to get this information as early on in the process as possible because it allows us to start finding the right solutions for our clients.
Just like we ask a lot of questions of our clients during the initial consultation, we also encourage our clients to ask us questions about the process. I love answering questions at this stage because it’s very important to me that you come out of the consultation feeling a bit more comfortable with the entire process.
After the initial consultation and before submitting an application, we are required to pull a credit report. Once that is complete, we write to you with a list of documents that we require in order to complete the application on your behalf.
Our practice is to ask for all relevant information upfront (income, down payment, IDs, additional documents as required). This is a hot topic for debate in the broker world. I’ve worked with dozens of agents/brokers who are firmly against asking their clients for all the information upfront. They believe that asking for as little information and documentation as possible lessens the burden on the client. However, I can’t count how many times I’ve had to decline files as an Underwriter working for the banks because the agent/broker provided us with false information (that they assumed was correct – they just didn’t ask their clients) or promised us documents that just didn’t exist (again, because they didn’t ask their clients). Even when all the correct information was eventually provided by the broker/agent, it took much longer for me to receive and review everything if I was constantly having to go back and ask for more clarification or documentation.
The point I’m trying to make here is that agents/brokers will eventually have to get all the information and documents anyway; doing it upfront minimizes how much they have to call/email you (which makes everything much quicker) and gives them an accurate understanding of your situation so that there’s no guessing involved and all the information they provide to the mortgage lender is accurate. This helps the lender trust your broker, and by extension, you.
Getting this information to us in a timely manner helps us put together your application quickly and circle back to you with any additional questions if we have them. Once we’ve received and reviewed your information and documents, it’s time for us to submit your application to the mortgage lender to begin the underwriting stage.
Underwriting means that the bank takes an in depth look at your overall profile to ensure it is within their risk tolerance and fits within their lending policies. An assigned Underwriter reviews your application and all the documentation submitted with it to determine whether you qualify for a mortgage with that particular lender.
Depending on how busy the industry is (it’s a very seasonal industry), it can take the lender’s underwriter anywhere from two days to one week to review and conditionally approve your application. This is another reason why I cannot overstate the importance of having all documents upfront to go with your application. Doing so can save days, if not weeks, of communications with the underwriter. After all, it takes time for you to get us the documents/additional information required, and for the lender to review those documents and information.
Once your application is approved, we get what’s called a Commitment Letter, which sets out all terms and conditions for the mortgage. This is a document you’d need to sign (along with a few other compliance/routine documents). At the approval stage, you would need to provide us with your real estate lawyer’s contact information. If you don’t have a real estate lawyer, we’re always more than happy to recommend a few that we’ve had positive experiences working with.
Depending on the type of application, we would potentially need to request an appraisal on the property in question (known as the subject property) at the initial approval stage. The appraisal can take a few days depending on how busy the appraisers are. In many cases, we order this upfront as well to try and expedite the final approval.
After the mortgage lender’s compliance department does a secondary (final) review of your mortgage application to make sure that everything meets their requirements, the Underwriter emails us a “file complete” note. This means that the Underwriter and the lender have reviewed your entire application and confirmed that they will be extending a mortgage to you.
When we get the “file complete” note, we enter the closing stage. At this juncture, the lender sends all required documents to your lawyer and your lawyer contacts you to sign all the paperwork. Most of the time, these signatures are completed right before the mortgage closing date. Once all the documentation is signed, all you need to do is wait for the closing date to come around so that the bank can advance the mortgage.
The takeaway is that the mortgage process is a lengthy process that requires clients to provide voluminous information and documents. This is because you’re applying to borrow hundreds of thousands of dollars from the lender. As a result, banks want as much information as possible to minimize their risk of loss. That said, the process does not need to be overly difficult or stressful.
A good mortgage agent/broker will ask you for as much information and documentation as required upfront because this reduces the stress of a nagging agent/broker, and allows the lender to make a timely decision on your application so that you know where you stand early on.
As always, if you have any specific questions about anything to do with mortgages, an idea for a topic you’d like us to cover, or need any additional information on something written here, drop us a line at info@palmmortgages.ca.
