The journey to becoming a homeowner is an ambition shared by many Canadians. Yet, uncertainty and apprehension are to be expected when beginning this new adventure. Choosing a realtor, finding a home, and worrying about bidding wars, it’s no wonder that buying a home is sometimes nerve-wracking
Obtaining a pre-approval can assist in streamlining the process and provide assurance of buying power. Understanding the pre-approval process is essential before beginning this endeavour. To aid in your mortgage pre-approval process, here are some helpful tips.
Prioritizing a mortgage pre-approval should be your first move when looking to buy a house. With pre-approval in hand, the entire process can be sped up, and any potential hiccups are eliminated. Additionally, this can help determine what price range you can afford. An estimate can be obtained through online mortgage affordability calculators; however, the amount the bank will approve will likely differ. If you have all of your necessary documentation ready, the pre-approval process can be done in as little as an hour. Make sure to reach out to a mortgage broker in your area to get the process underway.
Just as you look around for the right home to make yours, you should also look for the best mortgage rate available. Do not restrict yourself to a single lender or simply trust the rate provided by your local bank branch. Make sure to look around and compare different rates offered by other lenders or mortgage brokers who will try to negotiate a good deal on your behalf.
It is even wise to consider slight variations in the rate offered, such as half a percentage point. If you’re uncertain of what it can mean, use a mortgage payment calculator and compare different rates. Even a slight difference can significantly affect your monthly payments and the total interest you pay. Once you get a pre-approval, the lender usually guarantees to keep the rate offered for a period of 90-120 days. This is the perfect time for you to start hunting for your new home!
Collecting the documents required for a pre-approval or an application can be time-consuming, so getting started on it in advance is advisable. Check with your mortgage broker and start collecting the necessary documents in one place. Here is a typical list to give you an idea of what you will need:
- Identification to prove who you are.
- Bank and investment statements to prove your monthly payment capacity.
- Proof of assets such as cars, boats, etc., to demonstrate your net worth.
- Proof of income in the form of pay stubs or an employer’s letter for employed individuals and two years of notice of assessment for self-employed.
- Information about existing debt like student loans, car loans and credit cards. Lenders can easily access this information, so do not try to hide it.
Remain in contact with your broker throughout the process. To ensure you receive your pre-approval, make sure to be reachable in case your broker needs to get in touch. This includes avoiding trips where you don’t have access to email or phone. If you are planning to be away for an extended period of time, be sure to let your broker know in advance.
Once you’ve received your pre-approval, review the document thoroughly. Your mortgage specialist will send you the pre-approval document outlining the interest rate, loan terms, and amount you’ve been approved for. It’s important to read each page carefully and, if possible, have a lawyer or accountant review it.