But don’t stress over this yet. To guide you through the process, we have outlined below all the documents you will need to submit to the lender. Additionally, we have highlighted the typical issues that slow down approval and the steps you can take to ensure smoother processing. Let’s jump straight into the topic!
Documents Canadian Lenders Need from You to Process a Mortgage
1. Identification and Legal Status Documents: Proving Who You Are
2. Income and Employment Verification Documents: Showing Your Income is Reliable
Lenders need assurance that you can make your mortgage payments on time, which is why they scrutinise your income. Lenders typically prefer to see a steady work history spanning at least two years. However, lenders also understand life isn't linear; career changes or a short employment gap can happen. If there have also been changes in your income or job situation, ensure to provide a clear explanation upfront to the lenders.
3. Personal Financial Documentation: Your Financial Snapshot
4. Proof of Down Payment: Where Your Money Comes From
5. Property Documentation: Information About the Home
Finally, lenders need a clear picture of the property you intend to buy. Lenders require property documentation to:
- Partly confirm that the property is worth what you are paying for
- Partly to understand the transaction details, such as timelines and any conditions.
Mortgage Approvals Can Lag Even with All the Paperwork on Time
At times, even when you submit all the paperwork your lender requires, a few common roadblocks can slow the process. Here are some common hiccups, and what you can do to speed things up -
1. Lender Queues and Processing Backlogs
Mortgage lenders and their underwriters sometimes face a mountain of applications, especially during Ontario’s busiest real estate seasons. Hence, if you are also buying in a busy season, your mortgage application process may face a delay.
How to speed things up:
Get the mortgage pre-approval before house-hunting, and give the lender a head start on reviewing your finances. This way, when you find a home, the lender will finalise only the last few details instead of starting from scratch.
2. Extra Verification From Third Parties
Sometimes, lenders need to double-check your information directly with third parties. These extra verifications are part of the mortgage approval process. But these extra checks can cause delays if the other party doesn’t respond quickly.
How to speed things up:
Let your employer, bank, or any other third party know in advance that they might get a verification request. These third parties will respond faster if they know to expect the call or email.
3. Property Appraisal Delays
Most lenders require a professional appraisal to ensure the home you are buying is worth the agreed purchase price. However, in busy markets, appraisers can be booked solid, and you might have to wait days just to get an appointment.
How to speed things up:
As soon as the seller accepts your offer, ask the lender to order the appraisal right away. The sooner the appraiser visits the property, the sooner the report will be ready.
4. Legal or Title Issues With the Home
A lender won’t release funds if the home has legal or title complications. Usually, you or the lender cannot discover these issues until your lawyer reviews the title search.
How to speed things up:
To avoid such problems and delays, work closely with your real estate lawyer right from the start. Request the lawyer to review the title early and flag any potential issues before they cause major delays.
5. Delays in Releasing Your Down Payment Funds
You might have your down payment ready in theory. But the actual transfer of funds can still take time. For instance, if your down payment comes from a sale that hasn’t closed yet, you are at the mercy of that timeline. Or if you are withdrawing from your RRSP, processing might take several business days.
How to speed things up:
If you are withdrawing from your RRSP through the Home Buyer’s Plan, submit your withdrawal request early. If you are relying on a property sale, confirm the exact release timelines so you can plan your closing dates.
A Tip to Keep Your Mortgage Moving Without Holdups from You!
Clearly, most of these mortgage approval delays stem from factors beyond your control. Slow third-party responses or property appraisal wait times often depend on the schedules of others, not yours. These factors are beyond your control, but can significantly delay the mortgage approval and closing.
That’s why your best strategy is to focus on the part you can control: preparation. You now know which documents a lender will request, so gather them early. Keep the documents updated, organised, and ready to share with the lender at a moment’s notice.
Preparation may not prevent every possible delay. However, it will help you avoid last-minute scrambling and ensure no delays come from your side.