Obtain A Mortgage Pre-Approval.
Once you have decided to buy a home, the 2nd step is getting pre-approved for a mortgage with an experienced mortgage broker. Here’s 4 reasons why this is so important:
1. Understand Your Budget:
A pre-approval gives you a clear idea of the maximum loan amount a lender is willing to offer you. This means you’ll know exactly what you can afford and can target your home search to properties within your budget, saving you time and avoiding the disappointment of falling in love with a home that’s out of your financial reach. Having a clear understanding of what your interest rate & payments will be is imperative to understanding what the total costs of ownership will be.
2. Negotiation Power:
Pre-approval shows sellers that you are a serious buyer with the means to purchase their property. In a competitive market, a pre-approval letter can make you stand out from other potential buyers who have not yet secured pre-approval. Having all the lending paperwork submitted & reviewed prior to writing an offer can expedite the turnaround process for obtaining a full approval once we have a pending offer in place. Being able to provide a shorter condition/subject removal timeframe for obtaining financing will give more certainty to a seller & increase your negotiation power.
3. Locking in A Rate:
Most mortgage pre-approvals also come with the ability to lock in an interest rate for a specific period, usually up to 90-120 days. This means even if rates rise, you’ll be guaranteed the lower rate quoted in your pre-approval.
4. Catching Potential Issues Early:
Lending requirements are always changing. The process of securing pre-approval can help identify any potential issues with your credit score or financial status especially if your situation is unique (self employed, buying through a company, buying an investment property, etc). This early detection gives you time to address these problems before you find your dream home and enter legal Contracts to Purchase with a Seller.
To obtain a pre-approval, lenders will review your income, assets, financial obligations (debt) & your credit score. It is common for them to request the following documents. Prior to writing an offer, the only outstanding documents should be Purchase Contract & Property Details to ensure a timeline turnaround for a full approval.
Pay Stubs
T1 Tax Forms
Notice of Assessments
Letter of Employment
3 years of Tax Returns (Self Employed)
Articles of Incorporation
Financial statements
Bank account records
Investment records
Credit card &/or Line of Credit statements
Car loan details
Student Loan details
Child or Spousal Support Details
Copies of leases for investment properties
90 Day Savings Statements for Proof of Down Payment
RRSP statements for Home Buyers Plan (if applicable)
Gift Letters (if applicable)
Sale Agreement of Existing Property
Maintain Your Financial Stability:
While you’re seeking pre-approval and throughout the home-buying process, it’s vital to maintain your financial stability. Avoid sudden career changes or large purchases (new car loans!), as these can impact your credit score and the lender’s perception of your financial reliability. By showing stable income and sensible financial behavior, you can enhance your chances of securing a favourable mortgage and your dream home.
Navigating the real estate market can be complex, but having a mortgage pre-approval can simplify the process and give you an advantage in the Okanagan’s competitive market. Need an experienced Mortgage Broker? We can help!
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