THE IMPORTANCE OF A MORTGAGE PRE-APPROVAL15 May 2019
What is it?
A mortgage pre-approval is a process that provides you with important information to help you with your home search. When you get pre-approved for a mortgage, you’ll find out:
- The maximum amount you can afford to spend on a home
- The monthly mortgage payment associated with your maximum purchase price
- What your mortgage rate will be for your first mortgage term
Applying for a mortgage pre-approval is free and it doesn’t commit you to one single lender. However, getting pre-approved does guarantee that the mortgage rate you are offered by a lender will not change for 30 to 160 days (depending on your lender). By “locking in” your rate, you’re protected if interest rates rise while you’re shopping for a home. If interest rates go down during this time, your lender will honour the lower rate.
Why should I get one?
In today's market, getting pre-approved for a mortgage helps you in several ways. It saves time in your home search because you’ll only look at homes in your price range. More importantly, when it comes time to make an offer on a property, the fact that you are pre-approved tells the seller that you should have no problem financing the purchase, which will improve your chances in a multiple offer situation. Don’t forget that if interest rates fall while you are locked in, your lender will honour the lower rate.
How do I get it?
To get pre-approved, you must meet with either a mortgage broker or a lender. To determine how much you can afford to borrow to purchase a home, they will ask you a series of questions and you will need to provide some supporting documentation.
Depending on the mortgage broker or lender, the documentation you’ll need to submit for your pre-approval may vary. For example, some mortgage brokers require proof of income for a pre-approval, while others don’t require proof until your offer has been accepted and you need to finalize your mortgage application.