Domenic Gallippi
Mortgage Agent Level 2 - M23007938
domenic@bettermortgagesbydom.ca
Tel: 416-801-6616 | Cell: 416-801-6616
Domenic Gallippi
Mortgage Agent Level 2 - M23007938
domenic@bettermortgagesbydom.ca
Tel: 416-801-6616 | Cell: 416-801-6616
You've found your home.
Your offer has been accepted.
Your mortgage agent calls with good news:
“The lender has approved your mortgage.”
Naturally, that's a moment worth celebrating.
But there's something I always want borrowers to understand:
A mortgage approval doesn't necessarily mean the lender is ready to advance the money.
In many cases, an approval comes with conditions that must be satisfied before the mortgage can fund.
And those conditions can be just as important as the initial approval itself.
What does a mortgage approval actually mean?
When a lender approves a mortgage application, it has assessed the information provided and determined that the application may meet its lending requirements.
However, the approval may depend on outstanding items.
These could include:
Verification of employment and income
Confirmation of the down payment and its source
An acceptable property appraisal
Review of outstanding debts
Verification of property details
Satisfactory legal documentation
Until the required conditions are fulfilled, the financing may not be ready to close.
Think of the process as having several stages.
The lender assesses your income, credit, debts, down payment and property information.
The lender issues an approval subject to specific requirements.
Your mortgage agent and lender work through the outstanding documentation and verification requirements.
Once the lender is satisfied, it coordinates the required legal and funding arrangements.
Even at this stage, the transaction must meet the lender's final requirements before funds are released.
The process isn't complete simply because an approval letter has been issued.
Suppose you receive an approval based on a particular income level.
The lender may still need to review your employment letter, pay statements, tax documents or other evidence.
For salaried employees, this can be relatively straightforward.
For self-employed borrowers, commission earners and individuals with multiple income sources, the review may be more involved.
The lender needs to establish that the income is acceptable under its policies.
A number entered on an application isn't necessarily the number the lender will ultimately use.
What happens if the appraisal comes in low?
This is another important risk.
Suppose you agree to purchase a home for $900,000.
Your financing is structured around that purchase price.
But the lender's appraisal determines that the property is worth $850,000.
The lender may calculate its maximum loan amount using the lower acceptable lending value.
That could mean you need to contribute additional down-payment funds.
In some situations, it could require restructuring the financing or reconsidering the transaction.
The price a buyer agrees to pay and the value a lender accepts are not always the same.
Here's a situation I regularly caution buyers about.
You've been approved for a mortgage, so you decide to purchase a new vehicle.
The monthly car payment is $750.
From your perspective, the mortgage is already approved.
But from the lender's perspective, your debt obligations have changed.
That new payment could affect your debt-service ratios and potentially your qualification.
The same concern can arise if you:
Change employment
Reduce working hours
Take on additional debt
Miss credit payments
Make large unexplained financial transfers
Until the mortgage funds, it's important to avoid material financial changes without first discussing them with your mortgage agent.
Lenders don't simply want to know that you have sufficient money for the down payment.
They generally need to verify where the funds came from.
That may involve reviewing bank statements, investment account records, gift letters or sale proceeds from another property.
Large deposits or transfers may require additional explanation.
This isn't necessarily a sign that something is wrong.
It's part of the lender's responsibility to verify the transaction and meet applicable requirements.
The earlier those documents are collected and reviewed, the less likely they are to become a last-minute issue.
What happens if a condition cannot be satisfied?
The consequences depend on the condition and the purchase agreement.
Sometimes the issue can be resolved with additional documentation.
Sometimes another lender or financing structure may be appropriate.
But not every problem has a simple solution.
If financing cannot be completed and the buyer is contractually obligated to close, the consequences can be significant.
That's why financing conditions in an agreement of purchase and sale should never be treated casually.
A real estate lawyer should advise on contractual obligations and risks.
What does a good mortgage agent do after approval?
This is where I believe mortgage service extends well beyond obtaining an interest rate.
My responsibility isn't simply to submit an application and celebrate when the lender issues an approval.
It's to help move the application through the remaining steps toward a successful closing.
That means anticipating documentation requirements, communicating with the lender, reviewing outstanding conditions and helping borrowers understand what is still required.
Sometimes the most valuable work happens after the approval is issued.
Receiving a mortgage approval is an important milestone.
But it isn't always the finish line.
Income, down payment, property value and other requirements may still need to be verified before funds are released.
The objective isn't simply to get your mortgage approved. It's to get your mortgage funded - and your home purchase successfully closed.
That's why I believe the details of the approval matter just as much as the approved amount.
Ready to discuss getting you approved and successfully closing?
Call/text: 416 801-6616. Email: Domenic@BetterMortgagesByDom.ca
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