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Mortgage Approval Process

Getting approved for a mortgage could be the most important step in the home buying process. If you weren’t already pre-approved, you’ll begin your mortgage approval process after you’ve 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’ll need to provide your mortgage broker or lender with specific details about the home you’re purchasing, along with your income and down payment details. 

Check out the informative video below to see how you and your lender figure out how much mortgage you can afford, then read on for more detailed information. 

Some of the documents you may need to provide include:

Employment information:

  • Current employment income from a T4, pay slips or 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 set up 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 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’ll send the application to an underwriter at the financial institution you’re asking for a loan from. 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’ll approve you for the mortgage. The typical turn-around for a mortgage approval is 4-8 hours.


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Mortgage Application Rejection

If your mortgage application is not approved, there are several steps you can take.

  • You could get a guarantor to co-sign the mortgage application. This is often done by a parent or relative.
  • You could seek an alternative mortgage with a trust company or a private lender. These companies specialize in lending to homebuyers who cannot obtain a mortgage through a traditional lender like a bank, credit union, or mortgage broker.

    One thing to consider during the mortgage approval process is what kind of mortgage you want, e.g. fixed vs. variable, short-term vs. long-term, etc. In today's challenging mortgage environment, where rates are currently elevated but rate cuts are on the horizon, this can be a little tricky. Check out the informative video below on this topic. 

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