- Final approval is about the property: the lender may ask for an appraisal.
- Under 20% down, the loan insurance premium is added to the loan; in Québec, the 9% tax on that premium is paid in cash at the notary's.
- Home insurance is required by the lender before signing.
Final approval
Send the accepted promise to purchase to your lender or mortgage broker the next day. They check that the property is worth the price, sometimes through an appraisal, and that your situation has not changed since the pre-approval. This is where the loan becomes official.
Your financing condition's deadline is short, often one to two weeks. Answer document requests quickly, and above all, change nothing in your situation: no new credit, no big purchase, no job change if you can avoid it. When the approval letter arrives, your broker sends the proof to the seller, and the condition is lifted.
Mortgage loan insurance
With less than 20% down, your loan must be insured. The insurers are CMHC and two private insurers; your lender chooses. The premium is a percentage of the loan, higher when the down payment is small, and it is added to the amount borrowed: you repay it with the mortgage.
A Québec particularity people often discover too late: the 9% sales tax on that premium cannot be financed. It is paid in cash, at the notary's. On a premium of about $15,000, that is about $1,350 to plan for in your closing costs.
Home insurance, and the loan choices
Before signing, the lender requires proof of home insurance covering at least the loan amount. Shop for it as soon as the promise is accepted: the amount counts in your monthly budget, and some houses, older or with an old oil tank, cost more to insure.
What remains are the loan choices: fixed or variable rate, the length of the term, and the amortization, 25 years or 30 if you are eligible. There is no universal right answer. A fixed rate buys peace of mind; a variable one follows the market. Choose by your risk tolerance and your room to manoeuvre, not by someone's prediction.
Frequently asked questions
Can the lender refuse after pre-approving me?
Yes, if the property fails the appraisal or if your situation has changed. That is exactly why the promise to purchase contains a financing condition with a deadline: if the loan is refused, you withdraw without penalty.
Accepted promise to the lender the next day, no change to your situation until approval, home insurance shopped right away, and the 9% tax on the loan insurance premium planned in cash at the notary's.
- Send the accepted promise to your lender or mortgage broker.
- Answer every document request the same day.
- Get three home insurance quotes.
- Add the 9% tax on the loan insurance premium to your closing costs.
Sources : CMHC, mortgage loan insurance · OACIQ, Buyer's guide (the steps after the promise to purchase)
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