A mortgage pre-approval is a key step to help you understand just how much of a mortgage you can qualify for. Have you ever anticipated a phone call from the doctor’s office? Instead of patiently waiting your going through horrible things in your mind or calling the doctor’s office every other day for an update. Often when a consumer applies for a mortgage they face the exact same stress. I guess you could say we are programmed for times like these to react a certain way.
Affordability for my home purchase
A pre-approval is meant to tell you one simple thing, how much you can afford to purchase a home. Many people think that a pre-approval guarantees them a mortgage. In a perfect world that would be ideal, however; there are other things that need to be considered.
A pre-approval only gets so much attention from your bank, credit union or mortgage lender. It’s a high-level view of your application before looking deeper into things. The details you provide are not confirmed in any way shape or form. You share your employment information and the computer does the rest.
Requirements for a mortgage pre-approval
A lender will check your credit score
Knowing what your credit score is will give a lender an inside look at how you use your credit. Seeing how you maintain the credit you’ve been approved for shows trust. Credit scores range from 300-900. This rating is what tells the story about you to lenders. A high score means the chance to get approved for great interest rates.
The lender will review your employment
Whether your self-employed, full-time, or part-time hourly. A mortgage professional uses this information to tell the lender about your job and how you make money.
The bank will take a look at your whole financial picture
A mortgage professional will ask for things like assets. Any savings, investments, cars and more. These assets help paint a picture about your net worth and how much money you have saved up.
All the liabilities you have will be factored into the pre-approval. Things like credit cards, lines of credit, and loans. Normally these things show up on your credit report.
Lastly, a lender needs to know just how much you have saved to put towards a house. Lenders will want to see that you have some of your own money to contribute towards your home purchase. The smallest down payment required to purchase a home in Canada is 5% of the final purchase price.
If you are purchasing your first home or even moving into a new home it’s important to get an idea of what you can afford. Talk to a mortgage specialist who can work with you to take the right steps.
Transitioning from searching to buying
There is no time table to follow if you’re looking to get pre-approved for a mortgage. Approvals are normally valid for 90 to 120 days depending on the lender. After that time frame, the pre-approval expires.
Ideally, you want to time a pre-approval so that your offer on a property is done right after that. If you plan on purchasing a home within a month from now, then start today.
Your pre-approval will turn into a mortgage application once you’ve made an offer on a home. This is the time where your mortgage broker is working with you to get all the documents you need for the mortgage lender.
Pre-approved: getting a mortgage that fits
During the process, it’s exciting to take a look at all the features that come with a new mortgage. There are so many features and lenders to choose from. Your mortgage agent can uncover options that are made for your lifestyle.
- Setting a payment frequency weekly, bi-weekly, monthly or semi-monthly.
- Having the option to pay your mortgage down with a lump sum of cash.
- The length of the mortgage term can range from 1-10 years.
If your working with a real estate agent then they would have already asked you about a budget. While looking for a house you should always connect your realtor with your mortgage broker. Makes for a much smoother home buying process.
Dos and don’ts during your mortgage application
We all have different expenses that change from month to month or even by the week. There are some key dos and don’ts that you should follow while looking for a mortgage.
- Work out your own monthly budget before speaking with your mortgage broker.
- Think about 1 or 2 areas that you’d like to live in.
- Ask a mortgage agent what documents you will need.
- Check your credit to know what your score is.
- If you have bad credit, don’t apply for anything more. There is still a good chance to qualify for a mortgage with a large down payment.
- Avoid buying a new car until after your mortgage and new home have been finalized.
- No major purchases that affect what you can borrow.
- Don’t leave your place of employment or make a career change.
Buying a home is a big step, whether it’s your first time or fifth time. Planning ahead makes big difference in getting the best possible mortgage. Use a savvy mortgage broker that can work through the challenges you might have.
If you’re looking for help and want to get pre-approved for a mortgage call us at 1-855-242-7732 or apply online today.