When working with buyers, one of the first items to be reviewed is financing. I would hate to disappoint you by showing you a home that is beyond your means. Reviewing your numbers with a mortgage broker or loan officer will give you the confidence to look in the appropriate price point and to put forth an offer to purchase with the knowledge that you can move forward. Apply for a preapproval
with my list of approved mortgage reps.
What is the difference between pre-qualification and pre-approval?
Getting pre-qualified is the initial step in the mortgage process. A lender may generally ask you a number of basic financial questions and based on that information provide you a general statement of qualification. This process is based on a general income to debt ratio and does not look at your specific financial history, credit score or review other personal information.
Getting pre-approval is much more detailed and provides you a realistic personal evaluation of your ability to purchase. You will be asked to fill in an application, provide income verification, funds verification, account information and your credit history will be reviewed. You will also most often be able to lock into the current interest rate or the lowest rate between today and your date of purchase within a set time frame (90 to 120 days).
It is especially important for new buyers, anyone with previous credit issues, newcomers to Canada, anyone starting a new job or people running their own business to be pre-approved.
If credit history or credit issues are impacting your ability to purchase, your mortgage broker may be able to provide you with resources to improve your credit history. You will only know if issues exist by completing a pre-approval.
Please note that a final mortgage is always dependent on the specific property to be purchased, so even with a pre-approval you should strongly consider including a financing condition in the Offer to Purchase in order to protect yourself.
What to expect during a pre-approval:
A mortgage broker or banking rep will request your employment records which may include paystubs, letters from an employer or recent tax filing. Your broker will review your credit report; as well as documentation regarding any savings, gifts or other sources of income such as invesments or rental property. Your current debts will be reviewed.
Once an offer has been made, the bank will also perform an appraisal on the home.
Once you have a pre-approval, it is very important that you do not do anything to change your financial situation or credit score until you take possession of your home. This is especially so if you are intending to purchase close to your maximum amounts.
- Pay all of your bills on time
- Do not apply for any new credit
- Do not make large purchases on your credit card or lines of credit such as furniture or holidays
- Do not make purchases that would put a HOLD on your credit card for a large amount such as a deposit
Your finances will be re-reviewed by your lender just prior to issuing your mortgage. Depending on your purchase this may be 30 or even 90 days after your initial offer was accepted and your initial application was reviewed.