What is a Mortgage Pre-approval and Why It Matters?
This will keep you focused on shopping for homes within your price range. If you qualify for a pre-approved mortgage, you’ll be certain of the size of the mortgage for which you qualify and guaranteed a rate for a specific period of time. If you don’t qualify for a pre-approved mortgage, we will be able to help you estimate a mortgage-qualifying amount.
Going to open houses, scouring through the neighborhood, and looking into buying your dream house or residence in Canada may be exciting and enjoyable. Still, there is a possibility that you might have some difficulty getting a mortgage to help you purchase your new home.
Most home sellers expect purchasers to have a pre-approval letter at hand that shows proof or documentation of their assets and income, good credit, employment verification, and more. Most likely, sellers will be more willing to negotiate with those who prove that they can secure funding or financing.
As you look for a house, getting pre-approved for a mortgage can be a crucial action to take. Consulting with a lender and getting a pre-approval letter equips you with the chance to talk about loan options and financial budgeting with the lender; this step can clarify your total home-seeking budget and the monthly mortgage installment you can afford.
Also, seeking pre-approval before a deliberate house search places you in a more concrete position to improve your overall credit profile. You’ll also have more time to save money for any costs in purchasing a home.
What is a Pre-Approval Letter?
If you are granted a mortgage pre-approval, your lender will present you with a pre-approval letter. Most of the time, this document should be with letterhead to consider it official. This official document means to sellers that you are a serious buyer and proves that you have the financial means to successfully make a home purchase.
Mortgage pre-approval letters usually include the acquisition price, loan application program, interest rate, loan amount, down payment cost, expiration date, and the home address. The pre-approval letter is submitted with your offer, and some home sellers might also demand to examine your bank and asset statements.
Getting a mortgage pre-approval doesn’t require you to borrow from mortgage lenders. When you’re set to make an offer, you can choose the lender that offers you the best rate in terms of your personal needs and preferences. Also, acquiring a mortgage pre-approval doesn’t guarantee that a lender will approve you for a mortgage loan, especially if your financial status changes between the pre-approval phase and underwriting.
How Long Does a Pre-approval Letter Last?
The time frame differs by mortgage lenders, but a mortgage pre-approval is usually valid for ninety (90) days. If you’re still house-hunting around Canada after the expiration point, you can request the mortgage lender to renew the pre-approval. You may need to present updated data and information, and the lender may review your financial status again.
What To Consider on the Pre-approval Process.
The mortgage amount approved by the lender will depend on the value of the property and the value of your down payment. The pre-approval mortgage amount is the maximum amount you may get, but it doesn’t necessarily mean and guarantee you will get a mortgage for that same amount.
You can also look into houses in a more economical price range so that you don’t stretch your budget to its limit.
Note that you also need money for:
- moving costs
- closing costs
- ongoing maintenance costs
Tips to Get Pre-approved for a Mortgage Loan.
Obtain your credit score and know where you stand in terms of financial status before reaching out to a mortgage lender. A high credit score will qualify you for better rates.
Check and review your credit history. It is highly recommended to request copies of your credit reports and dispute any errors you may see on your record. If you find delinquent accounts, work with creditors to resolve the issues beforehand.
Calculate your debt-to-income ratio. Your debt-to-income ratio, or DTI, is your gross monthly income percentage toward debt payments. This includes credit cards, student loans, car loans, financial support, and any kind of debt.
Gather all your financial and personal information for easier accessibility. This includes listing or compiling your identification cards, home addresses, employment details, banking and investing information, and proof of income. Preferably, you should have two (2) consecutive continuous employment, but there are some exceptions regarding this.
Contact more than one lender. It is profoundly recommended to compare offers from multiple lenders. Doing this can help you compare rates and fees and save you money in the long run.
Last Notes
Remember that a pre-approved mortgage doesn’t guarantee you a loan. If you don’t get approved, you can begin working on what has been the issue. May it be paying your debts, improving your debt-to-income ratio, saving for a larger down payment, or resolving disputes or inaccuracies on your credit reports. Whatever it is, if you go through the pre-approval process, you can take care of the problem before you start looking for a home to purchase.
If you need assistance with your pre-approval process, you can definitely reach out to us, and we are glad to help you! Saif is one of the top mortgage agents in Canada, and he will evaluate your financial position and arrange transactions by finding the best mortgage lender for you. Contact us now to access many lenders Saif is connected with that offer a wider range of mortgage products to choose from.
Below are the areas we service in Canada: Toronto, North York, Scarborough, Pickering, Oshawa, Ajax, Whitby, Etobicoke, Thornhill, Richmond Hill, Markham, Stouffville, Uxbridge, Vaughan, Concord, Woodbridge, Mississauga, Oakville, King City, Caledon, Nobleton, Milton, Aurora, Newmarket, East Gwillimbury, Keswick, Bradford, New Tecumseth, Georgina, Innisville, Guelph, Barrie, Ottawa, Orangeville, Collingwood, Kitchener, Hamilton, Cambridge, Waterloo, St. Catharines, Niagara Falls, London, Peterborough, and Ontario.
