Pre-Approvals – A Crash Course
If you’ve decided to start the journey of buying a new home and want to get a mortgage for it, it’s a good idea to first check how big of a mortgage you would be able to get.
It would give you a general idea of the price range you could look for, and with it, shorten the time and effort you will spend.
Moreover, the sole fact of knowing that you will be approved for a mortgage will give you the peace of mind when you find the house of your dreams. You wouldn’t have to worry whether or not you’ll be able to buy it, you will already know.
That’s why in today’s article we will go over some of the mortgage pre-approval basics and discuss why it’s a good idea to get it.
Why Get a Pre-approval?
Getting a pre-approval means going to a potential lender to ask for an assessment of the maximum amount of money they would lend you and at what interest rate.
This will allow you to get a general idea of what you can look for and at what cost, which facilitates the whole home buying process.
Among the many reasons why a pre-approval is a good idea to get, here are some of the main ones:
- You will know how much money you can receive and what type of property you can look for
- It would make you appear more serious to realtors and sellers when bidding for a property
- In most cases, mortgage lenders will give you a 90 to 120-day rate guarantee so you can shop around for a house knowing the rate you will be asked to pay for a certain period
- You will know where your financial problems are and what you can do to improve your credit score
Get a Full Pre-approval
Make sure that you’re getting a full pre-approval, not just a pre-qualification because both are two different things.
A pre qualification allows you to get just a vague idea of what you’d be able to get in terms of mortgage and mortgage rates as lenders will only look at your income and debt, not further financial information.
On the other hand, a mortgage pre-approval, lenders verify your whole financial situation, including employment, tax records, sources of income, credit history, and everything else that lets them assess your current financial standing and give you a more accurate estimate of what type of mortgage you can get and at what rate.
When you want to get a mortgage pre-approval, you will be required the same or most of the documents that are required when getting a mortgage. These may include:
- Personal identification documents – a driver’s license, passport, personal ID, etc.
- Proof of income and personal finance – T4s or pay stubs
- Proof of employment – a letter from your employer, pay stubs
- Information about any other assets you possess – cars, houses, boats, insurance policies, investments, etc.
- Information about any current debt or financial obligations you have – car loans, credit card debt, student loans, lines of credit, etc.
These documents will give your advisor a general idea of your financial stability and buying power which will help them assess your creditworthiness.
What Happens After Getting Pre-approved?
After you get a mortgage pre-approval, don’t take it as a definitive approval for a mortgage as well.
While most lenders will guarantee the pre-approval rates for 90-120 days, you still have to maintain and prove your creditworthiness from the time you receive a pre-approval to when you apply for a mortgage.
The lender will take into consideration the fact that you’ve been pre-approved, but not as a definitive confirmation of your ability to receive and repay a mortgage.
They will also re-check your income, finances, and employment for themselves and decide whether or not they will lend you the amount of money you require.
Questions to Ask Your Pre-approval Lender
When you get a pre-approval, it’s important to ask the mortgage agent or lender a few questions:
- How long is their pre-approved rate valid for?
- Will the interest rate they gave go down if the other lenders’ interest rates go down during the pre-approval period?
- Can the pre-approval period be extended to more than 120 days?
Keep an Eye Out For Better Rates
Finally, remember that the rates you receive in your pre-approval aren’t necessarily the best rates you can get.
The rates you find at other lenders or during the final mortgage approval may be lower than the ones you were given in the pre-approval period.
In fact, most lenders usually mark up the pre-approval mortgage rate to add that additional safety net.
That’s why our service can help keep you up to date on rates by assigning you your own personal mortgage broker – more on that here.
Being declined for a mortgage after you’ve found your dream home can be devastating, but you can prevent this from happening by getting a pre-approval.
Knowing your rates will help you make a more informed decision and go through the home buying process easier.
A Dominion Lending Mortgage Broker can help you get familiar with pre-approvals and guide you through the whole process, from getting a pre-approval to getting a mortgage and buying a house.
We are dedicated to giving you the most helpful mortgage advice and giving you the best mortgage service, no matter what your needs are.
As mortgage agents who specialize in Pre-Approvals, you can be sure that we have the solution for you that will take away all of the stress and get the best mortgage product for you.
Get started today by applying online – it’s free and takes less than 90 seconds. Apply here at: https://www.goodadviceforabetterlife.ca/application/