Getting Pre-Approved for a Mortgage
I often get asked, “Where do we start?”. The answer to this question, in my opinion is with getting a pre-approval for a mortgage. Before you can decide where and what to buy, you’ll need to have an idea of how much you can afford. Having a pre-approval already in place, before beginning your house-shopping will make the whole process much smoother! What exactly is a pre-approval? A pre-approval determines the home price you can afford, it also allows you to lock in a mortgage rate in case rates increase during your home search. The BEST part? A mortgage broker is paid by the lender you choose, so your representation will most likely be FREE!
Below is the list of Mortgage Professionals that I recommend to my clients. Having a pre-approval is just the first step, once you’ve selected your dream home and you have a conditionally accepted offer, you will need to be in close contact with your mortgage broker in order to waive your financing condition on time! By this point, your mortgage representative will have already begun the process and very likely, already told you what steps are coming next. You both will be compiling documents and reviewing your mortgage rates and terms with the goal of having a firm mortgage commitment by your condition date!
Working with a Mortgage Broker
Most buyers need at least some financing (a mortgage) to purchase a home. The two most common sources of a mortgage are directly through a bank or through a mortgage broker. Typically, banks only offer their own mortgage products while mortgage brokers can source mortgage products from different lenders.
Interview questions for a mortgage broker
- are you a licensed mortgage broker?
- do you represent the borrower, the lender or both?
- do I need to sign a contract?
- what services do you provide and how will you help me?
- do you charge borrowers a fee?
- how do you receive compensation for your services?
- how many lenders do you work with?
- was most of your business done through one lender last year?
It’s important that borrowers understand the relationship they have with their mortgage broker.
A mortgage brokerage may:
- represent the borrower (you);
- represent the lender; or,
- act as an intermediary.
Mortgage brokers have a responsibility to clearly explain their role to borrowers they’re working with.
When they are representing you, the borrower
When a mortgage brokerage represents you, as a borrower, you are a CLIENT. They must act in your best interests at all times, and will owe you general, fiduciary, and regulatory obligations. These include undivided loyalty, confidentiality, full disclosure, obedience, reasonable care and skill, and full accounting. They will recommend financing options to you, advocate on your behalf, and provide you with confidential advice.
When they are representing the lender
When a mortgage brokerage is representing the lender as their client, they will be acting in the lender’s best interests at all times, not yours. They can still work with you; however, they will treat you as a customer.
When you are a customer, the mortgage brokerage must:
- treat you honestly and act with reasonable care and skill
- gather information on the property you want to finance and on your financial situation
- explain the lender’s options to you
- complete the necessary documents and submit them to the lender
- tell you about the transaction’s progress and pass along any communications from the lender to you
The mortgage brokerage cannot give you advice or act in any way that would be a detriment to their client, which is the lender. The lender has their undivided loyalty.
When they are acting as an intermediary
A mortgage brokerage may act as an intermediary between you, as a borrower, and potential lenders. In this case, both you and the lender are customers of the mortgage brokerage.
The brokerage will facilitate the mortgage deal by gathering information, explaining the options, completing the necessary documents and keeping both sides apprised of the deal’s progress. They will not act to the benefit or detriment of you or the lender(s). Alberta mortgage brokerages often work as intermediaries when working with residential borrowers.
It is the mortgage brokerage’s decision
Each mortgage brokerage decides its own business model. Some only represent lenders, some only represent buyers, and some will represent neither.