How long does it take to get approved for a mortgage in Canada
Finding a suitable mortgage is as important as finding a dream home. When you find a home you’ll likely need to get mortgage approval quickly. In this article, we will break down the mortgage approval process and how long it takes.
What is a mortgage?
A mortgage is a loan that allows you to purchase a property. Once you find a house you like, the next step is to find a mortgage lender. You have to make a 5%-20% down payment on the property based on its cost, and the rest can be a mortgage.
The steps to getting approved for a mortgage
1. Gathering the information
Mortgage applications require extensive paperwork. The first step is to get your letter of employment. Your manager or HR team can provide you with this document. You will also need all applicants’ tax returns, credit history, and bank statements. These are the primary documents. A lender may ask for more depending on their requirements.
2. Mortgage pre-approval
To avoid delays in making an offer on your chosen property, you can get a mortgage pre-approval. A pre-approval allows you to understand your mortgage approval limit and affordability. You can get a quick pre-approval with these easy steps.
Find a lender
Looking for the right lender is just as important as finding the perfect property. You should shop around and ask hard questions before making a decision. Do not forget to check interest rates, loan term, and flexibility regarding pre-payments. Some lenders also offer rate commitment for a fixed number of days after you get the quote.
Apply online
Once you submit the requested documents to the lender, they will undertake a complete evaluation. A mortgage specialist will look at your down payment, debt-income ratio, assets, and credit score to determine your mortgage approval limit. In most cases, you should receive a response in 2-3 days.
3. Mortgage approval
Once you have been pre-approved by a lender, you can start house hunting with a budget in mind. When you find a house, you will need to notify your lender to begin the underwriting process. Everything will happen in the same manner as explained in the application section. The only difference is that you will receive a mortgage approval confirmation at the end. It will be followed by your lender sending you an official commitment. This document should include your interest rate, mortgage term, and more. Your mortgage broker can request additional documents when they are closing the sale.
4. Closing day
Mortgage disbursement becomes official on the closing date. On this day, you will have to bring the money for the closing costs (approximately 3-4 percent of the purchase price), down payment, and sign the mortgage documents. Once completed, the mortgage broker will notify the lender and they will transfer your funds to the lawyer, who will then send it to the sellers’ representatives.
Approved for a mortgage in Canada? How long does it take?
As we now know, the process to get approved for a mortgage is long, and it requires extensive documentation. Although it can be stressful at times, here are some tips that can help you.
- Rely on your real estate agent. They have been through this process multiple times and can help you out if any challenges arise.
- Talk to your financial advisor. They can help you understand the process and check if you have a good credit score that can get you access to the best interest rates. Do not forget to get a list of your assets and debts to help with your mortgage application.
- Get a good lawyer if problems arise. When investing in a property, you cannot be too careful. That is why it is vital to find a professional you can trust.
Overall the complete process can take anywhere between 11 to 22 days. It can be shorter or longer based on your unique situation.