What is involved with the Mortgage and Purchase Approval Process?

Author: Gary Corriveau

Getting approved for a mortgage could be the most important step in the home buying process. If you were not already pre-approved, you will begin your mortgage approval process after you have made your Offer to Purchase and your offer has been accepted. Your Offer to Purchase will be conditional on financing, which means you need to secure your mortgage approval before you can move forward with your home purchase.

The mortgage approval process is similar to a  mortgage pre-approval: you will need to provide your mortgage broker or lender with specific details about the home you are purchasing, along with your income and down payment details.

Some of the documents you may need to provide include:

Employment information:

  • Current employment income from a T4, most recent payslip, and a signed letter from your employer
  • Other sources of income such as investments, rental income, or freelance income

Down payment information:

  • If you are using your own funds: savings or investment statements from the last 90 days
  • If you are using the Home Buyers’ Plan (HBP): proof of withdrawal from your RRSP
  • If you are using a gift from a family member: a letter stating the money is not a loan

Financial information:

  • The deposit amount that was included with your Offer to Purchase
  • An inventory of your current assets and liabilities such as investments or car loans
  • A void cheque to setup mortgage payment withdrawals

Details about the home:

  • The address
  • The closing date
  • Property tax, condo fees, and heating cost estimates
  • A copy of the real estate listing
  • A copy of the accepted Offer to the Purchase agreement, including the exact purchase price
  • A copy of the home appraisal, home inspection, and/or land survey
  • Your lawyer’s name, address, and phone number

Once your broker or lender has all of these details, they will send the application to an underwriter at a financial institution. The lender will use debt service ratios to determine if your application fits within their guidelines. If the lender is satisfied that both your finances and the property fit within their qualifying guidelines, they will approve you for the mortgage.