05 Jan What are Mortgage Pre-Approval Requirements?

What are Mortgage Pre-Approval Requirements?

Mortgage pre-approval is more that just getting an interest rate quoted in a first meeting or via an on-line tool. A detailed review of your income, debts and credit history are required to ensure confidence with your pre-approval and that there are no surprises after you have an accepted offer on a property. When completing a mortgage pre-approval it is important to ensure accurate information is obtained, as if any of these items are inaccurate it can greatly effect the pre-approval and could leave a client in a situation where they default on their purchase contract.

Items required for pre-approval are highlighted below, keep in mind, they may be subject to additional requests;

• Copy of most recent pay stub– for full time salary employee
• For self employed individuals – 2 years of Notice of Assessments with coinciding T1 Generals 
• For hourly employees without guaranteed hours– a recent paystub, employment letter along with the last 2 years of T4s, Notices of Assessment and T1 Generals
• For Canada Child Benefit income– a copy of your most recent government notice showing your CCB benefit amount and a bank account statement (with name account number) showing the direct deposit of the CCB amount. I’ll also need a copy of birth certificates to show the child(ren)’s ages.
• For Pension income-T4A slips plus a bank account statement (with name and account number) showing the direct deposit of the pension.
• Down Payment and Closing Costs – via 90 day bank/investment history or statement showing where the funds are being held. All deposits or transfers $2000+ will require additional information or statements, ie- If you are transferring large amounts within accounts, a 90 day history will be requested for every account used. All statements must show your name and account number for ownership. Statements cannot be redacted or filtered in anyway. **closing cost requirement with all lenders is 1.5% of the purchase price. This full cost may not be applicable in your situation if you are entitled to the land transfer tax rebate but is still required to show the funds are available aside from the funds being used for down payment**

Even after the above items have been provided and the pre-approval letter is issued, it is still subject to final review by the lender once an accepted offer is obtained. The letter will include the below terms and conditions.

• Final approval is subject to meeting lender standards for property eligibility, credit history, employment income and verification of down payment.
• The total mortgage amount may vary depending on the value of the purchased property, appraisal report, default insurance costs, property taxes, utilities or condominium fees, if applicable.
• The monthly payment amount includes principal and interest only and may be adjusted for property taxes.
• The interest rate is guaranteed only for the term shown. Changes in the term will be at the prevailing interest rate at the time of the request.
• Any material changes to the application details between now and the home closing can void this approval.
• This letter is not a Mortgage Commitment and does not include the terms and conditions of the formal approval from the lender. The brokerage, broker or agent shall not be responsible for any loss or damage suffered by any person or persons as a result of relying on this letter.

It is very important that none of the information provided to the lender for the purpose of the pre-approval changes between the time the letter was issued, and the closing of your new home. Every transaction is different, not all of these items will apply to every client’s situation so it is essential to work closely with your Mortgage Agent to ensure an accurate application is provided to the lender and your new home purchase goes smoothly.

Source: Reni McNeil of Mortgage Brokers Ottawa

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