What information the lenders want

After you have found a property to purchase, you can approach the bank or mortgage broker and provide them with mortgage information.
You can get a hard copy of a mortgage application from your prospective lender or you can fill an application on line through the internet. In all cases you should have the following mortgage information ready:

1. Personal details:
Name, address, telephone number, date of birth, Social Security Number of both yourself and spouse if applicable, number of dependants, number of years at this address.
2. Your job:
Name, address, telephone No. of your employer or if self-employed the name of your Company, your position, length of employment. Same details for your spouse if he/she is going to be a co-applicant.
3. Income:
List all your gross income from all sources before any deductions and tax which include salary, commission, bonus, rental income, business income....
4. Monthly Financial Obligations:
List all payments that you are paying every month which include mortgage information, credit card payment, car loan payment, department store payment, line of credit payment, student loan payment, consumer loan payment....
5. Networth Statement:
List all your assets which include the market value of your home, car, business, stocks, mutual funds, money in the bank, money people owed you....
List all your liabilities which include the balance of your mortgage, bank loan, car loan, department store credit card, credit card, money you owed people.
The difference between assets and liabilities is either your Net Worth or your Net Deficit.
6. How much you plan to put as down payment for the purchase of the property.
Where is this down payment coming from: own savings, borrow from parents, gifts from parents.
7. Are you going to live in this property (owner occupied)
or are you going to rent it out (rental property)
8. Have you been bankrupt for the last 7 years.
9. Address of the property you are purchasing, purchase price, heating cost, property tax, condominium fee. Type of dwelling - detached, semi-detached, townhouse, condominium/strata, other.
10. Name and telephone number of your lawyer who is helping you close this purchase.
11. How much you wish to borrow.
12. Amortization period you have chosen (maximum 25 years).
13. Term you have chosen: 6 months to 10 years.

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What Happens At The Bank or Mortgage Broker Office

1. The Bank's mortgage department will review the mortgage information you have provided and process your application.

2. The Mortgage Broker will:

a. quickly review the mortgage information on your application.
b. obtain a copy of your latest Credit Report.
c. contact you to clarify or obtain further helpful information as necessary.
d. Assess your individual need.
e. Transmit your application and Credit Report electronically to one or more suitable lenders.

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The Objective Of Any Lender Is Two-Fold

1. You will be able to make your monthly payment on a timely manner.This is most important because lenders hate the hassle to take you to court.
2. In the event that you default, the lender is able to recover his money by selling your property.

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What Lenders Look For In Your Application Form

1. How fiscally responsible you are:
Lenders will obtain a "Credit Report" which will give a history of your payment record.
For example your report may show:

a. if you had been slow in your credit card or car loan payment
b. if you had a debt you did not pay off or if you had been bankrupt.
c. if you are over your credit limit with your current lenders.Your credit score improves if you keep your borrowing within 75% of your credit limit with the lender
d. Conversely if you pay on time, it will show positively on the report.

The Credit Bureau Office which keep record of your credit behaviour, assign a credit score to your account. The higher the score the better you are.
If your score is under a minimum threshold, the lender will decline your loan
It is therefore in your best interest to behave responsibly with all your debt obligations.
Most Banks, Trust Company and Credit Union use approximately the same threshold.
However there are other lenders who will accept higher risk and lower threshold but they compensate themselves by charging a higher interest rate.
You can learn more and obtain a free copy of your own Credit Report at Equifax: Please Click here.

2. How stable is your job:
The lender hates if you keep changing job.
The lender will look at your position, length of employment, the stability of your industry, the stability of your employer, your income level.
The lender will ask you to provide a letter from your employer confirming your position, length of employment and salary. sometime the lender may instead accept a copy of your pay-stub as confirmation of employment.

3. Can you make the monthly mortgage payment:
The lender will add your gross income from all sources and add all the expenses associated with the mortgage you are applying for.
Total expenses should not be more than 32% of your total gross income.
This is your Gross Debt Service Ratio (GDSR).

The lender will also add all the expenses associated with the mortgage PLUS all your other debt obligations such as credit card payment, car loan payment.
Total payments should not be more than 37% of your total gross income.
This is your Total Debt Service Ratio (TDSR).

Most Banks, Trust Company and Credit Union use approximately the same GDSR and TDSR ratio.
However there are lenders that will accept a higher ratio and compensate themselves by charging a higher interest rate.

It is possible that you have a big monthly payment that you need to make under a loan. This big payment will adversely affect your TDSR. In many instances you can get rid of this huge payment by paying it off from new borrowing under a mortgage loan.

4. Appraisal Report:
If your application is now approved. The lender will now like to know if the property you have purchased is really worth the purchase price.
The lender will ask your permission to proceed with an appraisal report. Borrowers pay the appraisal fee but often due to competition the lender may absorb the fee. Just ask.
The lender may turn down your application if there is unsatisfactory comment on the report such as: dilapidated state of the property, unsatisfactory neighbourhood.
If the appraised value comes in lower than your purchase price, the lender will either reduce your loan amount or proceed as a High Ratio Mortgage.

5. Lender's Mortgage Offer:
If everything is fine, the lender will issue a written mortgage offer letter describing all the details about the mortgage for your acceptance.

6. Registration:
The lender will forward a mortgage instruction letter to your lawyer to prepare the mortgage document for your signature.

7. Advance of Fund:
On closing date, the lender will advance the fund to your lawyer who will make payment to the property seller on your behalf.

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