There are always two essential parties to a mortgage transaction, the borrower and the lender. Only when the requirements of both are satisfied can a mortgage transaction be successfully completed. It is the function of the mortgage broker to ensure both parties to the transaction are satisfied. Mortgage brokers work for both the borrower and the lender.
Where a mortgage broker is involved, there should always be three satisfied parties to a mortgage transaction; the borrower because he or she has received a loan that suits his or her requirements, the lender because he or she has given a loan that enhances his or her portfolio, and the broker who has satisfied both parties and earned his or her commission. An analysis of the function of a mortgage broker in any normal leading transaction should clarify the positions of both lenders and borrowers, and, at the same time, illustrate the range of services that a mortgage broker performs.
Mortgage brokering consists of obtaining, assisting in obtaining or attempting to obtain a mortgage loan for a borrower from a mortgage lender, in return for consideration or in anticipation of consideration.
Other Mortgage Originators
Besides mortgage brokers, financial institutions have mortgage representatives whose function it is to develop leads from their contacts within the community. Many of these representatives are commissioned or bonus-based.
The mortgage representatives’ business comes from many sources, such as new construction sites and previous customers. Financial institutions branches, on occasion, will refer business to their mortgage representatives when clients are unable to visit the branch. Representatives will visit clients at their place of employment or home.
The lender is any person, group of persons or institution who make mortgage funds available to borrowers. These can be financial institutions; such as chartered banks, trust companies, life insurance companies, (mortgage) loan companies, credit unions / caisses populaires and pension funds; mortgage investment companies (MICs); governments or private individuals.
A realtor is defined as a person, duly licensed by provincial statute, who, on behalf of another, for or in expectation of a fee, gain or reward, directly or indirectly, from any person, in any manner, offers, or attempts, to acquire or dispose of real estate. With proper disclosure the realtor is duly licensed to solicit properties for sale, market properties for sale and work with willing buyers.
The real estate industry is governed by provincial regulations and most realtors are members of a local real estate board, a provincial real estate association and the national association – Canadian Real Estate Association (CREA) – and adhere to the corresponding guidelines and code of ethics of each association.
Home & Property Inspector
A Home and Property Inspector is a qualified home inspector who will visually inspect the property and provide a written report. The inspector will report on the interior as well as the exterior structure including all the home's major systems such as: plumbing, electrical, insulation, heating and cooling, roof and foundation. Ask your inspector for his/her credentials to ensure he/she has the training and experience to enable you to make an informed buying decision.
A real estate appraiser determines the market value of the house based on its condition and the selling price of comparable homes recently sold in the area. The estimate of market value determined by the appraiser helps the lender decide on a reasonable loan amount for the mortgage.
In any real estate transaction, the lawyer is responsible for the following:
- Assist with and review the Contract of Purchase and Sale
- Preparation and review of mortgage documents
- Ensure all closing documents have been completed properly, including the title search and title insurance
- Explain all closing documents, obtain signatures, and record all documents with the appropriate local governments
- Collect the transaction fees and disburse funds to the appropriate parties
- Prepare and present a final Statement of Adjustments
In Canada, institutional, high-ratio mortgages (those representing more than 80 percent of the property value) must be insured against default by either Canada Mortgage and Housing Corporation (CMHC), Genworth Financial Canada or Canada Guaranty. The borrower, as part of the borrowing process, will obtain and pay for the insurance, which protects the lender against default.
One who is authorized to represent and act on behalf of another person or business, the principal in transactions involving a third party. Unlike an employee who merely works for the principal, an agent works in place of the principal.
A mortgage underwriter verifies the mortgage application information and supporting documentation submitted, makes an assessment of risk on both the applicant(s) and the property, and approve or decline the mortgage loan.