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Frequently Asked Mortgage Questions
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| Q. |
What is a Mortgage Broker? |
| A. |
A Mortgage Broker is an independent, licensed professional who is trained to provide you with expert advice on mortgages.
In addition to being able to locate funding sources and access the best available rates, a mortgage broker also puts his expertise in presenting proposals for financing to work for you and increases the likelihood of successfully obtaining mortgage financing. |
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| Q. |
Why deal with a Mortgage Broker? |
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Mortgage Brokers work to represent your best interests and not those of a lender. As they are not employed by a financial institution, Brokers are not limited or restricted in the type of mortgage products that they can offer you. They will source the best financial package to you’re your specific needs, whether it is from a Chartered Bank, a Trust or Insurance Company or through Private Funds.
Today, home buyers have a large assortment of financial options to choose from. Searching for the best value requires a lot of time and effort and many Canadians are intimidated by the competitive mortgage process. Choosing the wrong mortgage product can cost you thousands of extra dollars. It makes sense and pays to work with a mortgage professional to represent you to get the best mortgage suited to your needs and save you money. |
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| Q. |
When should I obtain a pre-approval? |
| A. |
You should obtain a pre-approval if you plan on buying in the near future in order to secure an interest rate guarantee from the lender. The interest rate can usually be held for 60 to 90 days. The pre-approval is based on the information you provide to us in your application and is subject to verification of conditions such as employment and down payment verification. |
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| Q. |
Can I use money gifted to me for a down payment? |
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Yes. Most lenders will accept gifted money from a family member as a down payment. A written statement may be required and signed by the donor confirming that the amount being gifted is not a loan. Download form. |
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| Q. |
What is the minimum down payment required to purchase a home? |
| A. |
A minimum down payment of 5% is required to purchase a home, with the best rates and terms for a mortgage. This minimum amount cannot be borrowed and must be confirmed from your existing cash resources or from a gift from a family member.
In addition to the down payment, you must demonstrate your ability to pay the costs incurred with closing your mortgage. These may include appraisal fees, legal costs, survey certificates etc.
Products are now available which allow a buyer to purchase a home with 0 (zero) downpayment. Rates and terms are generally higher than those available for more conventional or insured mortgages, and good credit is a requirement. |
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| Q. |
If I have a declared bankruptcy can I still qualify for a mortgage? |
| A. |
Your mortgage application may be considered based on the circumstances of your bankruptcy and your credit history since the discharge of the bankruptcy. Call a mortgage consultant to discuss your mortgage qualification. |
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| Q. |
What is required to obtain a first Mortgage? |
| A. |
The following are usually required:
- Full time employment / proof of income
- Good credit rating
- Confirmation of the down payment
- Online Approval Application
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| Q. |
What can I use for a down payment? |
| A. |
You may use the following for a down payment:
- Registered Retirement Savings Plan (RRSP's may be used as a down payment up to a maximum amount of 20,000 and is not subject to income tax if repaid within a specific time period)
- Gift from immediate family
- Accumulated savings
- Sale of existing home
- Sweat equity
Products are now available which allow a buyer to purchase a home with 0 (zero) downpayment. Rates and terms are generally higher than those available for more conventional or insured mortgages, and good credit is a requirement. |
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| Q. |
What costs are involved in obtaining a mortgage? |
| A. |
The following are the most common costs incurred:
- Legal costs (Usually between $600 - $1000)
- Insurance on the property and mortgage applicant
- Appraisal fee (if required)
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| Q. |
How long does it take to complete a mortgage transaction? |
| A. |
Once all requested information (i.e. Income verification, down payment verification and property details) is provided, the transaction may be completed in as little as 2 weeks. |
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| Q. |
Can I get pre-approved before I find the home I want to purchase? |
| A. |
You may receive pre-approval from 60 to 120 days prior to the purchase of your home. For new home construction, many lenders will extend that period to fit the construction schedule. This pre-approval period means that you can take advantage of the best possible interest rate available during the period that you are searching or building a new home. |
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| Q. |
How much can I qualify for? |
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The guidelines for the maximum amount that you may qualify for vary and are subject to the lenders’ criteria and product availability. In order to determine what you may qualify for, please submit your application for a quick approval. |
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| Q. |
What is CMHC? |
| A. |
Federally owned and operated, the Canada Mortgage and Housing Corporation (CMHC) is responsible for evaluating both the client and the purchase property to determines if the borrower may purchase a home with less than a 25% down payment. CMHC may insure the mortgage on behalf of the financial institution through a premium which is added to the mortgage. As a result, lenders can approve mortgages for those clients that have less than a 25% down payment. |
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| Q. |
What is the purpose of a mortgage
broker? |
| A. |
The primary focus of a mortgage broker is to find the absolute best mortgage product to fit the client’s needs. As a specialist in mortgages, a broker works for the client and will only deal with lenders who are competitive with the interest rates, terms and service with the local branches of financial institutions. |
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| Q. |
How can a mortgage broker get
a better rate than my own bank? |
| A. |
Many mortgage lenders are in the business of lending money for mortgages only and don’t require offices in each city or town. As such, they don’t carry the large overhead of some traditional financial institutions. This fact, combined with large volumes, allows these lenders to discount the rates much lower than your own bank can provide. |
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| Q. |
Other than rates, why should
I use a Mortgage Broker? |
| A. |
In addition to rates, because mortgage-based financing is the broker's primary business, he or she has developed expertise in what type of mortgage financing each lender prefers to pursue. This kind of knowledge not only results in the most favourable rates for each project, but often whether a project is funded at all. |
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| Q. |
How do Mortgage Brokers Find Superior
Rates? |
| A. |
Interest rates are a concern to borrowers. Because of their daily contact with lenders, brokers know which project or home attracts a favorable interest rate from one institution, but a higher rate at another. Some institutions, in fact, will only accept mortgage submissions from mortgage brokers.
These rates, and preferences for types of mortgages, can change daily, depending on economic circumstances or based on the size of an institution's portfolio in a particular type of mortgage. Your Mortgage Broker keeps current and knows which lender to approach first. As a result, mortgage rates obtained by Brokers are among the best available at the time of placement. |
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| Q. |
What are the costs to dealing
with a Mortgage Broker? |
| A. |
Mortgage Brokers do not always charge a fee for their services, but if a fee is warranted, it is negotiated up front and documented.
Fees are based on the complexity, strength and type of project. They are a one-time only charge, and are quoted once the details of the deal have been examined.
Your investment in the professional services of a mortgage broker is generally returned very quickly, not only in time saved, but also in the caliber of the financing received. |
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| Q. |
Why should I go to a Mortgage
Broker first? |
| A. |
A professional presentation to a lender on the first application will get the best response and save you valuable time and money. Secondary applications with previous credit bureau inquiries may be more costly.
Often the success of obtaining mortgage approval depends on the way a proposal is presented and to whom it is sent. Your Mortgage Broker is trained to present your mortgage proposal where and how it will get the most immediate, positive result.
You don't call an insurance company for insurance - you use an insurance broker, because of their expertise, product knowledge and rates. So remember, call your mortgage broker first! |
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| Q. |
Do Brokers only do Residential
Mortgage? |
| A. |
Brokers can place all types of loans provided they are backed by mortgage collateral. All sizes of loans, from small loans backed by a residential property to commercial properties in the millions of dollars, are readily available. Mortgage-backed loans in the millions are not uncommon with private pension funds and private lenders.
In addition to handling straight mortgages, mortgage brokers are often called on to assemble financing (based on mortgage collateral) for businesses. Mortgage brokers excel in this type of financing package because of their expertise in looking at loans from a mortgaging perspective, as well as their knowledge of financial institutions' interests and desires for a particular product at specific times. |
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| Q. |
How do Brokers get better deals
than many Banks? |
| A. |
The lenders who work with mortgage brokers include traditional sources, such as chartered banks, trust companies, as well as corporate and private pension funds. In addition to these sources, brokers often develop professional relationships with private sources of funds, termed private lenders. These lenders can provide many various mortgage products not available at conventional sources.
For best results call your Broker first. |
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| Q. |
Can I still go through my bank
with my Broker? |
| A. |
Yes, letting a Mortgage Broker represent you to your own financial institution can often result in a better rate than you could get on your own.
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