Applying for a mortgage approval is a long and tedious process. The time it takes also depends on where you start—if you’ve found a home yet, what type of loan you are getting, how prepared you are with your documents, what type of lender you will be borrowing from, etc. But if you are already nearing your closing day and you haven’t heard about the current status of your mortgage application, it can be nerve-wracking and might push you to check your other options if it falls through. Let’s discuss more on this matter so you would know what to expect and get you more prepared.
How Long Before Closing is a Mortgage Loan Approved?
Prior to getting an actual mortgage, it is better to get pre-approval first. Getting mortgage pre-approval is optional but has its benefits like knowing your mortgage affordability, locking in low interest rate, and it shows that you are a serious buyer. You can get a mortgage loan pre-approved 90 to 120 days prior to the closing date on your property purchase. This does not guarantee that your mortgage will be approved though, so still make sure that there is no substantial change in your financial standing during the purchase period where your lender will be alarmed at your capability to pay your mortgages. You want to make sure that your mortgage will be funded in time for closing your dream home.
For the actual mortgage application process, Big banks like TD, usually take around 30-45 days to process a mortgage loan application. They usually give you a conditional decision and an estimated closing cost within 1 to 3 days of your application. Then comes the long process of inspection, home appraisal and underwriting, after which the closing agent will inform you of your closing date, time and other information. The bank will inform you of your closing cost 24 hrs before the closing date so you can prepare the bank check for the amount.
Alternatively, with private lenders, you can get your mortgage application approval on the same day to a week maximum. This is because private lenders match all borrowers with tailored loans and facilitate a streamlined approval process that simplifies the mortgage financing as much as possible.
Does a Closing Date Mean the Loan is Approved?
Closing date is the day everything is finalized for the successful transfer of the title of the property to the new homeowner. This is the time when both parties, including the lawyers, have a meeting wherein the buyer will review and sign the paperwork on the mortgage loan, down payment, closing cost, purchase price, and the title of the home. Closing Date does not mean the loan is approved, and you need it to be so you can finalize the sale on that day.
What usually happens on Closing Day is first, the buyer signs the documents prepared by their notary or lawyers related to the mortgage loan and property purchase. Second, the buyer is given the amount needed to “close” on the property through a bank draft. This amount is usually the remaining down payment and closing costs (commissions, lawyer’s fees). After confirming the receipt of the funds, the notary or lawyer will then register the purchased property with the Land Title Office to make the transfer official. Lastly, the seller will receive the proceeds from the sale after the mortgage balance and closing costs have been settled.
Can You Be Denied a Mortgage after Closing?
The scary reality is yes, you can be denied a mortgage even after closing. Banks and other mortgage lenders have the legal right to go back on the mortgage commitments they issue and reject your application. Below are some reasons why banks and lenders terminate mortgages:
- Wrong, inconsistent, or inaccurate information in your mortgage application.
- Changes in your employment status (job loss, new job started, etc.).
- Changes in your financials like debt payments, debt status, or a new additional loan.
- New negative findings on your credit report.
- Issues with the property appraisal report or changes and/or additional findings in the physical condition of the property.
- Issues on the property title or other legal issues.
- Policy changes in the bank or the Federal and Provincial government.
- Pandemics like COVID-19 or other Acts of God
Try to avoid changes in your life that might affect your financial standing significantly to avoid the cancellation of your mortgage.
What Happens if my Mortgage Falls Through on Closing Day?
This is a dreaded scenario to all home buyers— to almost have their dream home, only to be stopped from getting it because their mortgage loan fell through. What you can do is try to apply for an emergency mortgage loan from private lending organizations. Also known as C Lenders, these are the go-to option for borrowers that fail to qualify for a loan at type A or B lenders such as banks and credit unions. Private Mortgage Lenders accommodate borrowers with bad credit, low income, no income, or hard-to-prove income which makes them a more risky investment. Because of this, private mortgage lenders charge the highest mortgage rates of around 7% to 12% and 4% to 6% in fees. This is meant to be a temporary solution until the borrower’s financial situation improves and the borrower can soon qualify for a long-term loan from traditional A lenders that offer lower interest rates.
How Long Does It Take to Close a Mortgage?
The average time to close a mortgage ranges from 45 to 60 days. This is from the filing of the loan application to the day you are given the funds at closing day to finalize the home purchase. The time it takes to close a mortgage depends on a lot of factors like your loan type, your loan purpose (refinance or purchase), your credit profile, or whether you applied for pre-approval or not.
Below is the list of steps when buying a house and an estimated timeline of how long each process takes, assuming you’ve already found a home:
- Negotiating the offer on the house: 1-5 days
- Escrow deposit: 5-10 days
- Title Search and Title Insurance: 1-2 weeks
- Home Inspection: 1 day
- Finalizing the purchase agreement: 1-3 days
- Mortgage application completion: 1 day
- Home appraisal: 5-10 days
- Mortgage loan approval: 2-4 weeks
If you want to close in your house fast, pre-qualify for a mortgage loan as early as when you start looking at a house, condo or cottage.
On the other hand, if you are looking into borrowing from private mortgage lenders, the closing time is much faster. The approval process can take less than a day since private lenders consider property value as the main factor in loan approval and not credit history which is time-consuming and tedious to check. You can have your money released in as little as 48 hours to three weeks. Find a private lender that understands your situation as a soon-to-be-homeowner and can work with you through your financial concerns. Mortgage Broker Store works with a network of private lenders across the GTA and are more than happy to guide you in important decisions that you will be making during the lending process.