Just How Important is Mortgage Pre-Approval?
Are you looking to a buy a home sometime soon? If so, you’ll want to get pre-approved for a mortgage!
Whether you’ve bought and sold many homes or are looking to make your very first purchase, pre-approval should be one of the first steps you take.
You want to be able to move quickly on a home, especially if you feel like you’ve found “the one.” This is even more important in a seller’s market, where a listing may have multiple offers in at once.
Say you did find your dream home. Without a mortgage pre-approval:
#1 – You don’t know for sure if you can afford that home… pre-approval clearly indicates what your maximum allowable mortgage limit is
#2 – You will have to get pre-approved before making your own offer… another buyer could purchase that home in the meantime
#3 – You may feel stressed out due to time constraints… pre-approval makes searching for a home the way it should be – enjoyable and exciting
No one wants to let their dream home slip through their fingers, so don’t let it happen to you… and get pre-approved for a mortgage!
Believe it or not, the importance of mortgage pre-approval applies to both the seller and your Realtor® as well. It shows them that you’re serious about buying!
Browse for the Best Rates
Chances are you wouldn’t purchase the first show home you viewed, so why would you do the same when it comes to a mortgage?
Your home will likely be one of the largest purchases you’ll ever make.
Do yourself a favour and shop around for the best mortgage rate. That means thorough research into multiple lenders – not just your bank – on interest rates, loan terms and qualifications needed.
Many home buyers opt to use a mortgage broker as they negotiate for the best interest rate on your behalf.
Many Realtors® highly recommend using a broker because getting a better rate even by half a per cent could mean lots of money left in your bank account over the long-term.
Collect Your Documents
If you’ve gone the mortgage broker route, they’ll let you know what documents they need to make an appropriate evaluation for your pre-approval.
Those include, but are not limited to:
- Social Insurance Number
- Bank and investment account statements
- Proof of assets
- Proof of employment
- Current debt, if any
Make Yourself Available
Once you’ve submitted all the necessary documentation, make sure you’re available to answer any questions your mortgage broker may have.
That means trying your best to not go on a vacation where cell phone towers and data services are non-existent.
If you’re mortgage broker cannot reach you, they may start to make assumptions. It’s all they can do when you’re unavailable.
This could mean getting denied for a mortgage pre-approval, so don’t let it happen!
And if you absolutely must be unavailable because of a work trip, for example, make sure to let your broker know about it!
Do your due diligence. Make yourself available as much as possible when your broker is reviewing your case. It’s simply in your best interest to do so.
Read the Fine Print
Assuming you’ve been approved, you’ll now want to read all the fine print on all documents you receive. They will outline very important details such as:
- Mortgage amount (maximum)
- Loan term
- Interest rate
Sometimes such documents can be a mind boggle. If you need help understanding them, ask someone you know, a family or friend perhaps, to help.
You can also ask your Realtor® if you have one and they should be happy to answer any questions you have.
Evaluate Your Finances
Just because you’ve been pre-approved for a $500,000 property doesn’t necessarily mean you’ll want to buy a home that costs that much.
Take a step back and evaluate the “other” costs associated with buying a home, such as:
- Down payment
- Moving costs
- Utilities and transfers of service
- Condo document review (if applicable)
- Home inspection
You may find that buying a home on the lower end of the $400,000 to $500,000 range instead of the upper end will allow you to continue to save money while taking on a new mortgage.
Aren’t sure about which mortgage broker to use? Ask an experienced Realtor® to refer you to an experienced broker who will have your best interests at heart.
Any highly experienced Realtor® should have the industry connections to make your next transaction as convenient as it gets.