Documents Brokers Need to Obtain

SOME PRELIMINARY DOCUMENTS TO OBTAIN: When obtaining a client's application, ensure to ask for the following which will expedite the process and make your job easier in knowing your client and providing them with the best option.  Every lender will look at a file and know what's good so address the weak points in your summary note in addition to speaking about the merits which will assist your underwriter to understand the file and client situation.

Basic upfront documents to review and discuss with borrowers before submitting to the lender:

Signed application and consent - Do not pull client's credit without having this upfront. Many realtors will ask you to do a pre approval or approval and say they'll send the application but it's a rush, can you pull the bureau and see what a client can qualify for. Do not do this without a signed consent and application by the borrower and have borrower send it to you directly.

Do not allow a realtor or a referral source to be the spokesperson because in most cases, the information is not accurate and later in the file, once you receive documents, the deal changes then you maybe close to closing date and you'll be blamed so to avoid conflicts, do your job as an agent/broker - speak with clients directly.

Equifax Bureau - it is best to have the client pull their bureau on equifax.ca, not trans union since all lenders require equifax bureau. Do not send a bureau that is 3 months or 60 days old to a lender because they'll ask you to pull a new one and a lot can change in this time. By having a recent bureau will allow you to review and work numbers out to see where the deal fits before you pull clients credit. Also review the bureau thoroughly, ask about why they had any derogatory comments, late payments, collections, proposal etc - obtain a reason so that you can inform your lenders. Ask clients if they took out any loans for furnace as this is typically registered as a lien and on closing then it comes up. Lenders will need it to be paid out or postpone so ask about this upfront. Some clients forget they do have such loans and they don't even know its registered on their property.

2 recent pay stubs - look for base salary and if there's commission or bonus added. Typically clients will input their total income on an application which includes commissions and bonus or allowance pay. Lenders will only use commission or bonuses based on 2 year average of income. If self employed - obtain 6 to 12 months bank statements, 2 years T4A and recent notice of assessment to ensure income tax is not owed to the government; this will also assist you to average the income if need be. Business registration/Articles of Inc. and T1 General or Financials. You may not need all of this to provide to a lender but it will assist you in underwriting and structuring the file. You'll be prepared if a lender have questions. If there's child tax credit for children under 12 - obtain 3 month bank statements or if client is part time, ask if it is permanent part time then you can use this income. If part time, ask if it has been at least 2 years so you can average the income from clients T4 or notice of assessment ( NOA).

Source of down payment (DP)- gifted funds can only be from immediately family OR if borrowed from a credit line, then you need to factor in 3% of the debt on liabilities - only some lenders will accept borrowed down-payment from a credit line. If funds are coming from a property that was sold, obtain the firm purchase agreement and solicitor can provide statement of adjustment or confirmation of the draft given to the borrower. If DP is coming from investments or bank savings, obtain 3 months history ( account must show name of ownership) some lenders will accept 30 days if the down payment is 20% or more. If funds are coming from overseas, ask from which country and obtain the paper trail for wire transfer plus confirmation of deposit to clients account when it is here. Be sure to know lenders will NOT accept funds coming from sanction countries so you'll want to plan with your clients to have the funds here for a minimum of 3 months.

If the transaction is a refinance and client is taking out equity - ask the use of funds, obtain comparable in the area for recent sales within the past 3 to 6 months as many clients will assume their property value to be more than what it really is. Ask if they purchased less than a year because most lenders will use the purchase price if it was purchased less than one year ( exceptions may apply). Appraisal will determine the actual value and condition of the property so be sure to ask about the condition as well and property type. We have seen many times where there's water leakage or the property is a single family detached but is treated as a rooming house or there's mold or doors are missing etc so ask your clients these questions.

If client owns more than one property, complete a rental worksheet, obtain mortgage balance, who is the lender, rental income if any via lease/ bank statement deposits, if rent is being received in cash - ask the borrower if they deposit any amount of this on a regular basis to their account ( advise the lender), obtain monthly payment, maturity date, date purchased and annual property tax also condo fees if any. Don't wait for a lender to do a title search and find out as this can cause the deal to be declined for non disclosure or your ratios may not work which will collapse the approval.

Verify IDs to ensure the name and address matches the application and bank statements. If the address is different, ask for clarification. Do not assume client didn't update their address as that maybe a property they own and didn't provide disclosure to you or it could be their business address.

Void Chq for mortgage payment - if cheque doesn't have clients name, look at the bank statements with the name of the borrower to confirm account ownership

Purchase Agreement - review the clauses, look for signatures, if closing date has passed, ask where the file went to, why they didn't close, obtain copy of cheque paid on offer and confirmation where it came from.

If MLS - see comments if property is being sold AS IS - this raises concern for lenders so again ask about the condition. You can find maintenance fees and property tax on the listing as well. If it's a private sale, ask about the relation between buyer and seller, how they come to know about the sale of the property. An appraisal is required for all private sale so inform the borrower of the approximate cost.

Inform the borrower of approximate overall cost that will be involved - Legal, land transfer tax, or discharge fees if it's a refinance, ask clients to obtain the penalty amount if they're breaking their mortgage prior to the maturity date, appraisal fee, brokers fee if any, lenders fee if any, inspection fee if any, moving expenses and any cost you feel that will be associated that borrowers should be prepared for.

On all purchases, clients must have 1.5% in addition to their down payment for closing cost. Lenders need to see this amount in their bank account.

Ask about assets, savings in the bank or investments which will add to the clients networth. Cars and jewellery does not matter much to lenders.

Use 3% of any credit card or line of credit debts regardless of the monthly payment when underwriting. Only fixed loans such as car loans, lenders will take the payment shown on the bureau in debt servicing calculation.

Qualify your clients on benchmark rate plus 2% for any mortgage term - call your underwriter or BDM to know what the qualifying rate is if you're not sure.

Be transparent with lenders so they can better assist you in structuring the file for approval.

If you follow the above and obtain items upfront, it will avoid any surprises and your file will be better positioned for approval. Lenders will also pick up your files faster as they'll know you have done your due diligence and packaged the file properly to save them time.

Most importantly, you'll be in a position to provide options to your clients and they'll not feel lost or feel that you're asking for documents all the time. Clients have no issue providing what you need once they know you are only asking these items to help in structuring their file for the best solution.

Lastly, before the closing date, make sure your compliance documents are completed and signed by the borrower because after closing, it can be difficult to get clients to sign and it could take a lot of time to reach them. Ensure your disclosure to borrowers are done properly and if you are charging a fee, have the client sign your letter of direction, send it to the solicitor otherwise you may not be paid on closing if there's a brokers fee. If you are paying a referral fee, include this on the disclosure to borrower. If someone does not want you to do that then why should you pay them and incur tax on their behalf when you've already done a favour in closing that file? Be professional and have a streamline structure in place.

Do NOT compromise your integrity for anyone and do NOT be afraid to ask for information!

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