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How a pre-approved mortgage can help you
Whether you’re planning the purchase of your first or fourteenth home, it pays to obtain a mortgage pre-qualification certificate (better known as a pre-approved mortgage) from the lender of your choice. Not only does this step provide peace of mind, it also helps your offer stand out from the pack in a multiple-bid situation.
A reality check
Your mortgage originator will examine your current financial situation to determine how much you can afford to borrow, and give you a realistic idea of what your monthly payments would be. Some people avoid pre-approvals because they feel they know how much house they can afford – or that the money fairy will suddenly appear when they find the property of their dreams. Not having a pre-approved Mortgage or Home Loan often leads to unsuccessful bids due to financing falling through, leaving both the buyer and seller in an extremely disappointing situation.
In other cases buyers become “house rich and cash poor” because most of their income is spent on housing. It’s worth it to take the time, which can be less than an hour or two, to start off on solid financial ground.
With a pre-approved mortgage and or home loans, you have an amount to have in mind while house hunting. Instead of scrambling to see every open house in the neighbourhood, you can focus your search to homes that fit into your predetermined price range and by comparing similarly priced homes, you’ll be better able to gauge the value of each property and find the one that’s right for you.
Whether you decide to use a mortgage consultant, who will negotiate on your behalf to compare rates and terms from several financial institutions, or your preferred bank, the process of getting pre-approved is fairly straightforward. You’ll be asked to provide your financial information, including all assets, liabilities and proof of income as well as the amount you have available for a down payment.
After reviewing your financial situation, the lender will determine the maximum mortgage amount you qualify for and lock in a mortgage interest rate. Pre qualification certificates normally last for 90-120 days. If you don’t buy a home within this timeframe, you may renew your agreement at the going interest rate when your guaranteed rate expires.
A firm offer
Home buyers with a pre-approved mortgage have the upper hand when they put an offer on the table. And it’s easy to see why. Having pre-approval demonstrates that you’re serious about purchasing a home—you’ve done your homework and have arrived prepared. It also officially addresses your ability to finance the purchase, which leaves no question in a seller’s mind that yours is a firm offer.
It’s great leverage in negotiation or if you find yourself in a bidding war – and because you know your limit, you won’t place a bid that goes beyond what you can afford.
After your offer is accepted, all that’s left for you to do is to send in the property and offer details, along with any other information requested, to your lender and your pre-approved mortgage will be converted into your actual mortgage in a matter of hours.
When it comes to buying a home, there’s no better way to approach a purchase than with the confidence and convenience a pre-approved mortgage provides.
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