The Mortgage Pre-Approval
Becoming a homeowner is a life-long dream for many. With all new experiences, there’s uncertainty, and you may second-guess yourself once or twice. You’ll be interviewing realtors, looking at homes, worrying about bidding wars, and of course, qualifying for a mortgage.
Getting a pre-approval is one of the best things that you can do to simplify the process and give yourself more confidence when purchasing a home. A pre-approval lets you know how much you can borrow with minimal risk. However, you’ll want to understand the pre-approval process before you get started.
5 Things to do in a Mortgage Pre-Approval
Apply for a mortgage pre-approval first
The first thing you should do is apply for a mortgage pre-approval. If you find a home you like, you’ll want to move quickly. Being pre-approved for a mortgage removes an extra step in the process.
Being pre-approved helps you know and understand how much you can afford to spend. However, the hard limit will always be how much the bank will approve you for – a mortgage pre-approval gives you that.
A mortgage pre-approval can be done within an hour if you have your documentation together. Get in touch with a Mortgage Broker near you to get started.
Allow your Mortgage Broker to Shop Around
As you’ll see several homes before settling on ‘the one’, you should shop around for the best mortgage rate. Don’t just go to your local bank branch and expect to receive a great deal. Do your research and use a Mortgage Broker who will negotiate on your behalf.
You’ll generally have a 90-to-120-day period where your offered rate will be held for you. This is when you should begin house-hunting.
Assemble your documentation
Collecting the documentation needed for a mortgage pre-approval and application can take time. In this case, it’s best to start getting the necessary documents together as soon as possible. Ask your mortgage broker what documents are required to finalize your mortgage and start gathering it all in one place.
The following list are needed to get started:
- Bank account and investment statements
- Proof of assets
- Proof of income
- Information about your debt
Stay in touch with your broker
Stay reachable in case your Mortgage Broker has any questions about your documentation. If you aren’t available, they may make assumptions about your intent, and reject your mortgage pre-approval. If you absolutely must leave town, make sure to inform your Mortgage Broker in advance.
Read the fine print
Once you’ve been pre-approved, your Mortgage Broker will send through your pre-approval document. This document will outline the interest rate you’ll receive, the loan terms, and the mortgage amount you’ve been pre-approved for.
4 Things NOT to do in a Mortgage Pre-Approval
The path to ruin is paved with good intentions, but it’s also paved with silly mistakes. Below are four rules you should stick with during the pre-approval process.
1. Don’t get pre-approved over your budget
Don’t get approved for a mortgage pre-approval at your maximum purchase price. Do your own calculations, figure out how much you can afford monthly (don’t forget the other costs associated with homeownership, not just the mortgage) and go from there.
2. Hold off on major purchases
Once you’ve submitted your documentation to your Mortgage Broker, your financial situation shouldn’t change from pre-approval to loan finalization. Any changes to your financial situation could ultimately result in loan rejection, even if you were initially pre-approved. To avoid rejection, don’t make any major purchases that change your debt service ratios.
3. Don’t apply for new credit
You shouldn’t apply for new forms of credit, like a personal loan or credit card, and don’t co-sign a loan for a friend or family member. Your debt level and available credit are both factors in mortgage approval, so increasing them may risk your pre-approval.
4. Don’t quit or change jobs
Finally, try to avoid changes to your employment status after you’ve been pre-approved. Steady and predictable income is crucial to most mortgage applications. Changing jobs or becoming self-employed will most likely throw a wrench into the mortgage approval process. Instead, if possible, hold off changing employers or starting a company until after you have the keys to your new place. If you have a job offer that’s just too good to pass up, you can learn more about how to handle this situation without necessarily jeopardizing your pre-approval.
It is VERY important to have a clear understanding of the implications when it comes to a Mortgage Pre-approval and how it can affect you. It makes all the difference in future planning and can impact you in very significant ways.
At GLM Mortgage Group | Dominion Lending Centres, we know what questions to ask. We have relationships with the lenders that you know about and the lenders you don’t. We would be pleased to educate you on the financial options available to you. We want you to make the best decision possible on the mortgage that you are committing to. Call us anytime for a FREE consultation on the mortgage products available to you.