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How do I get pre-approved for a mortgage in Canada?

“Always pick your yard based on your Summer lifetstyle.”

~ KARL

November 9, 2017 - Karl Yeh

One of the most important steps when buying a home is getting pre-approved for a mortgage. In this episode, we discuss how to get a mortgage pre-approval in Canada, the steps to get started, differences in mortgage specialists, collateral and more...

 
 
 
 
 
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Karl Yeh:

Hi everyone. Welcome to another edition of Homebuyer's School. Today I'm joined by Mujtaba Syed, Mobile Mortgage Specialist with TD Canada TrustToday the question we're going to answer is:

 

How to get pre-approved for a mortgage in Canada 

Mujtaba Syed:                 

Karl, the best way to get pre-approved for a mortgage is [00:00:30] to reach out to your bank, to your mortgage broker.

Book an appointment with them and kind of sit in and just work your numbers, work the application to see where your pre-qualifications are.

Karl Yeh:                             Any bank?

Mujtaba Syed:                  

Any bank that you're comfortable with. Someone that you have a relationship would be ideal. Someone that kind of understands where you're coming from.

 

How do I apply for a mortgage in Canada?

Mujtaba Syed:                  

The best way to apply for a mortgage is to book the appointment with the mortgage specialist, someone who specializes in mortgages.

Sit down with them. [00:01:00] Have the appointment.

It should be a fairly decent appointment. It shouldn't be very lengthy. Shouldn't be less than an hour to go over all your needs.

You should be able to bring in your documents with you. That includes any income documents, anything that you think you might need for a mortgage pre-approval.

The specialist at that time could even advise you what you need prior to the appointment, so you know you're not missing anything.

 

Can you break down some of the steps for
pre-approval?

Mujtaba Syed:                  

Yeah. Absolutely. The first step we definitely [00:01:30] do is look at ... We actually look at your credit.

Credit's a big part of getting pre-approved for mortgage. It kind of gives the bank an idea of your paying habits.

Technically, we'll look at it as more of like a character thing.

It's more when you promise to pay something, we want to make sure that you actually stay on top of your payments. That's definitely the first step.

Then second step, we look at your income.

The reason why that is so important is we need to know that you can actually service the mortgage with your current debts that you might have [00:02:00] or any financial obligations you might have.

So, we look at that.

We also look at your down payment, which is also very important to kind of see how many savings you have, what kind of saving habits you might have.

In a way, we kind of look at credit.

What you think that you might get pre-approved for depends on the house that you're looking for as well. Your income, saving habits, a whole bunch of different things.

                         

Do you require access to the financial records of people in terms of maybe their credit score or their income or so on?

Mujtaba Syed:                  

Yeah. For financial records, I guess for most average people, we'll look at income statements:

  • Could be your recent pay stub.
  • It could be a job letter.
  • It could be direct deposits going into your account.
  • What's your income.
  • We could also look at your year-end statements to kind of see if you're making any overtime.
  • You might have some bonuses.
  • You might have some shares or anything in the company. It could be a factor of both.

Ideally, we will like to get the most [00:03:00] income as possible, which really does help you qualify for a mortgage.

                        

Ss there a difference between full-time job? How about people who are consultants or have their own company? Does that have any impact?

Mujtaba Syed:                  

Yes. Absolutely.

If you're a full-time employee, it comes down to your debt servicing.

You could be a part-time person or a full-time person, but if the income is there to qualify for the certain amount that you're looking for, [00:03:30] it doesn't really matter.

Start times could matter. If you've started and you're still on probationary period with your employee, that could definitely affect.

If you're self-employed, we actually like to take a two-year average.

For self-employed or contractors, we kind of look at them as self-employed as well because their income can fluctuate. It can vary.

Banks actually want to see a two-year kind of like an average to see how the income has been for the last two years.

 

Is there a difference between applying for mortgage specialist with a bank versus an independent company?

Mujtaba Syed:                  

Yeah. A little bit.

Applying with a mortgage specialist with a bank is you're dealing with a bank employee.

You're dealing with someone who is very familiar with bank policies, bank procedures, someone who has direct access to the employees at the bank as well, which are the underwriters, which is someone that is going to look at your deal, someone who is going to approve your deal.

Also, they work for the bank.

So, they have direct access [00:04:30] to the underwriters, they have direct access to any other bank, different groups of the bank that they might need to reach out to regarding your accounts, anything like that.

The biggest difference I find between a mortgage specialist at a bank and a broker is a mortgage specialist at the bank, they kind of have to go through constant learning on a yearly basis.

We have to go through annual courses and annual certifications.

We also know our bank policies inside and out [00:05:00] because banking, as a financial, the institution, the industry, is constantly changing.

It means policies are changing, procedures are changing. Once you kind of focus, you kind of become that specialist.

Karl Yeh:                             

Going back to some of the steps in terms of getting pre-approved for a mortgage, do you also need some sort of collateral that ... Like whether it's a personal asset in terms of getting a mortgage?

Mujtaba Syed:                  

Absolutely. In the mortgage process, the collateral is actually the house that you're looking [00:05:30] at buying.          

That is going to be the collateral that you do. The bank will actually use that as a collateral.

Karl Yeh:                             

Okay. Do you have any other things to add in terms of getting pre-approved, how to get pre-approved?

Mujtaba Syed:                  

I would recommend that when you do look at getting pre-approved for a mortgage, definitely, definitely do your research.

The people that you're talking to, a specialist or the independent broker, it should be someone who is willing to work for your best interest in mind.

Checking [00:06:00] who has the best interest for you, who's going to work hard for you. Everyone's situation is a little bit different. Not everyone is cookie-cut, is what I like to call it.

Mujtaba Syed:                  

It's really kind of take an interview of the person that's going to be working for you, like as you might be taking interview for someone else or someone who's going to be [crosstalk 00:06:18]-

Karl Yeh:                             

Like a real estate agent, right?

Mujtaba Syed:                  

Correct. Doing that is because the financing part is just as important as home buying or finding part.

Karl Yeh:                             

Okay. Perfect. Well, thank you very much for the information. Thank [00:06:30] you everyone for joining us and we'll catch you next time.

 

Your turn:

Let us know if you have additional mortgage questions or home buying questions that we can answer by submitting them in the comments section below. 

Homebuyer's School publishes new content weekly so subscribe or check back regularly for the latest information, strategies and tips from homebuying experts. 

 

About Mujtaba Syed:

Mujtaba is an experienced mobile mortgage specialist with a demonstrated history of working in the banking industry. Skilled in Negotiation, Commercial Lending, Banking, Sales, and Credit Analysis. Strong product management professional.

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