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Mortgage Pre Approval

preapproved mortgages

Why Get a Mortgage Pre Approval?

Before you go shopping for a house, it is critical to get a mortgage pre approval.  Especially if you are a first time home buyer. A mortgage pre approval will help you determine how much you can afford to spend on a home.  A qualified mortgage broker can help you determine how much financing you are approved for. And can also help you lock into a mortgage rate in the event that mortgage interest rates rise.  They will help you determine:

  • The maximum amount you qualify to purchase a home for
  • The prospective monthly mortgage payment
  • The rate, term and amortization

In helping you determine these factors you can comfortably go shopping for a home. Additionally this will help ensure that you stay within your budget.  There is no cost to getting a pre approval and your rate will be guaranteed for 90-120 days.  Once your rate is locked in you will have the benefit of knowing that if mortgage interest rates rise you are guaranteed your pre-approved rate. Moreover, it assures you that if mortgage rates happen to go down you will get the new lower rate!

Getting a mortgage pre approval is a necessity.  So much so that even the Government of Canada has written an extensive report on it.  Also, this will likely be the biggest purchase of your life. With this in mind you should take some time and do your homework. Working with an expert can pay dividends and help you avoid costly mistakes.

How to Get A Mortgage Pre-Approval

To secure a pre approval there is a lot of information that has to be provided to ensure that you meet the financial and credit obligations to qualify for a mortgage.  A broker will help you accumulate the information you need to satisfy the lender’s criteria.  Some of the things that will be reviewed and requested will be requested and reviewed might include:

  • Credit score/worthiness
  • Amount and source of down payment & closing costs
  • Debt Service Ratios
  • Verification of Income

These are just some of the basics that are reviewed additional documentation that a lender may request might include:

  • Identification
  • Notices of Assessment to establish a baseline for commission employees
  • Job Letter, including position, tenure and guaranteed income
  • 6 months bank statements to prove down payment savings
  • Gift letter (if your down payment is a gift)
  • Proof of discharge from bankruptcy/consumer proposal
  • Proof of other monthly obligations (child/spousal support)

Once the lender is satisfied with the information, your mortgage broker will issue you a pre-approval. The details of which will confirm how much you qualify to borrow and it will protect you from rate increases. The rate guarantee for a mortgage pre approval is usually 90-120 days.  You can now comfortably go home shopping knowing how much you qualify for and the rate you are guaranteed to get.

Why Add a Condition of Financing

A condition of financing is critical to protect you the buyer. Keep in mind that there are some limitations to a pre approval which usually pertain to the property you are purchasing. With this in mind, it is always wise to make sure that your offer remains conditional on financing.  This allows the lender time to review the property you have put an offer in.

Financing conditions are important because in some instances the home you are putting an offer in on may have undisclosed previous issues. There are a whole host of reasons to put in a financing clause and the main reason is to protect you.  It gives you time to get your ducks in a row and gives you a bit of a cooling off period.  It also allows time to make sure that the lender has reviewed all of your supporting documents and has signed off on the financing.

Finally, a pre approval will usually tell you the maximum amount you are approved for. Also, there is no obligation to spend every penny you qualify for. It would be wise for you to stay away from the top range you’ve been pre approved for to make sure that you will always be able to maintain your mortgage. Because you don’t want to find yourself financially strapped. If you are considering buying, give the experts at the Mortgage Brokers Network a call at 1-877-383-1577 to see how decades of experience can work for you.

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