Frequently Asked Questions


Mortgage Process

Why use a Mortgage Broker?
  • Power of professional negotiating expertise
  • One stop convenience for access to numerous mortgage products
  • Unbiased knowledgeable advice
  • Access to unadvertised rates
  • Work for you, not the Bank


How much does it cost to use a mortgage broker?
The vast majority of mortgage clients do not pay a fee for the services of a mortgage brokers. To gain a
larger market share, the majority of financial institutions pay a finder's fee to mortgage brokers and at the
same time offer them their best discounted rates and fast approvals in order to gain their business. This
allows the mortgage brokers to shop among the various financial institutions for the mortgage rate and
product that best suits the needs of the clients and, in almost all cases, at no cost to the client.

In situations where traditional lenders will not approve a mortgage because of poor credit, and where the
application must be placed with a private or non-traditional lender, a brokerage fee may be charged to the
client. This cost must always be disclosed to the client up front and must be authorized in writing by the
client before it can be charged.


What is the advantage of dealing with mortgage brokers?
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.


What is the First Time Home Buyers' Plan?
  • The Home Buyers Plan is a federal government program that allows home buyers to use $20,000.00 for
    each purchaser from his/her own RRSP.
  • You must not have owned a principal residence within the last 5 years.
  • You must intend to occupy your home as a principal residence.
  • Minimum repayment is 15 equal annual instalments. This schedule can be accelerated.
  • The funds to be withdrawn must havbe been invested into the RRSP for a minimum of 90 days prior to
    withdrawal.
  • You must complete a Form T1036 .


Do I qualify for the 5% downpayment program?
  • The home must be located in Canada and is to be occupied as your principal residence.
  • You have from your own resources a down payment of at least 5% of the purchase price of the home.
  • Your mortgage payment must not exceed 32% of your gross household income. This includes payment of
    principal + interest + property taxes + heat + condo fees (if applicable).
  • You must be able to cover closing costs equivalent to at least 1.5% of the purchase price.
  • You meet the lender's elibibility requirements regarding income, employment and credit worthiness.


What is the advantage of a pre-approved mortgage?
The purpose of a pre-approval is to confirm in writing the maximum amount of money that you can rely on for
mortgage purposes. When interest rates are fluctuating, it's an advantage to know what your borrowing
limit is before you start house hunting. With a pre-approval, a lender will guarantee you for a specific
mortgage amount for a period of time, usually from 90 to 120 days. If the mortgage interest rate drops
before the lender advances the funds for a mortgage, you are given the lower rate. If the rates rise, you are
given the rate at the time you had the mortgage pre-approved.


What type of income proof do I have to provide?
In most situations lenders require a comfort level that the borrower has sufficient income and cash flow to
service the mortgage as well as any other obligations that they may have. The higher the Loan to Value (ie
mortgage amount vs. purchase price) the more important this becomes as the lender is placing less reliance
on the value and equity in the property and more on the earning power of the borrower. The following is a
summary of what Lenders require depending on what type of job you have:

Salaried Employees
  • Job Letter - Lenders use 100% of the income. Verification is made on company letterhead, signed by
    appropriate individual. If you are a recent hire, the letter should confirm that probation period has been
    passed. Bonuses, car allowances and other forms of remuneration should be mentioned if applicable.
  • Pay Stubs - Many Lenders will also require your most recent pay stubs.

Hourly Employees
  • Pay Stubs - showing year-to-date income verification.
  • T4's and/or Personal Tax Returns (T1 Generals)- 3 years to take an average.
  • Notice of Assessment - (NOA) - most recent to confirm no taxes owed.

Commission Income
  • T4's and/or Personal Tax Returns - 3 years to take an average.
  • Job Letter - confirming position.
  • Notice of Assessment (NOA) - optional depending on Lender.

Self-Employed
  • Financial Statements of Company - 3 years average of net income used. Depending on Lenders policies,
    The add-back of various personal expenses run through the company may or may not be allowed (eg's of
    allowable addbacks - Depreciation, Amortization, CCA (Capital Cost Allowance).
  • NOA's (Personal Notice of Assessments).
  • Personal Tax Returns ( T1 Generals showing personal net income).


Can I use gift funds as a down payment?
Most lenders will accept down payment funds that are a gift from family as an acceptable down payment. A
gift letter signed by the donor is usually required to confirm that the funds are a true gift and not a loan.
where the mortgage requires mortgage loan insurance, Canada mortgage and housing corporation requires
the gift money to be in the purchaser's possession before the application is sent in to them for approval.


What Is Bridge Financing?
A loan required by a builder so as to obtain funds during the period between a permanent commitment and
a construction loan.The lender will usually require a permanent mortgage commitment to the full amount of
the construction loan plus a hold back provision that states that only the floor amount will be funded at the
completion of construction.


Home Buying Process



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If you have any questions concerning your mortgage please email us at inquiries@smartymortgage.com.
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