“The ache for home lives in all of us, the safe space where we can go as we are and not be questioned.”
– Maya Angelou
The quote depicts the meaning of what buying a house means to people. It is a lifelong dream that we work towards and sometimes reality can be disappointing. Though the good thing is that if you plan well and in advance, you can achieve this dream of owning your own house. One of the important steps while buying a house in Canada is to getting pre-approved for a mortgage. If you are also house hunting, this article is dedicated to you. Consider this as your guide to know how to get pre-approved for a mortgage. Without any further wait let’s get started.
Tips to Get Pre-approved for a Mortgage
When you get a pre-approval, it allows you to know how much money you can borrow for your house and what would be the interest rate that you will have to pay.
Applying for the Pre-approval
You may wonder that in order to buy a house, the first thing that you need to do is consult a realtor or directly start finding the house of your dreams. This is not the case when it comes to reality. You need to get the pre-approval for a mortgage first.
If you have it pre-approved then you can move ahead quite rapidly to close the deal on the home. Pre-approval also comes with the aid of knowing how much you can actually offer to spend after a house. Pre-approval gives you the benefit of knowing the mortgage rates that are prevalent in the market. The best part is that this process doesn’t take long and can be done in an hour given that you have the documents required ready.
Be Ready with the Documents
This part can be time-consuming as you will have to make sure that the documents are factually correct without any errors. The best thing to do is ask a broker about the documents required to close the deal on a mortgage. Below is the list of documents that you may require for getting pre-approved for a mortgage.
- Identification to verify your identity.
- Your bank and investment account statement in order to get financial stability to pay the dues on time.
- Your proof of assets like owning a car, truck, etc.
- Proof of income; you can present your salary slip or even a letter given by the employer will work. If you are self-employed then you will have to give a notice of assessment.
- Details related to any debt that you own; in this, you will have to include credit card debt, student loan, auto loan, etc.
Look Out for Competitive Pre-approval Rate
Once you have gathered all the documents and the next thing for you to do is look out for the ideal pre-approval partner that can give you competitive mortgage rates. It is the highest amount that you will have to take as a debt for the rest of your life. Getting a competitive interest rate for even half a percentage can make a difference. Do your research, ask your friends or family, meet brokers and then make a decision.
When you get pre-approved for a mortgage loan you can hold the same rate for 90 to 120 days. It means that when you are serious about buying a house and getting approved, you can get the advantage of lower interest rates in case there is a probability that the rates will increase in the near future.
Keep the Mortgage Broker in Touch
You should develop and maintain a good professional relationship with your mortgage broker. Also, make sure that the contact detail that you have given to the broker is where you are available anytime the broker has any questions or doubts related to your application or documents. In case you are not going to be available for a few days, let the broker know about it and give the contact details of your spouse or someone that can be available to clear queries on your behalf.
This is the last step that you will have to take after you are pre-approved for a mortgage loan. Once you get the pre-approval legal documents make sure that the loan terms are what you prefer, the interest rate is what you were promised, and the amount that you will get pre-approval for a loan.
If you have issues understanding any financial jargon consult an expert or someone that has done the procedure before you. Just make sure that the documents match your details.
Things to Avoid for Getting Pre-approved for a Mortgage
A lot of time we know what we need to do but we forget to focus on what we need to avoid. Try to avoid these mistakes in the procedure of getting a mortgage pre-approved.
Avoid Incurring Larger Expenses
This is the biggest mistake that people make while getting a loan pre-approved. When you have submitted documents for a mortgage pre-approval, you need to make sure that your financial position does not change until you get the process done. If you will make a large purchase like buying a car, you may take up a loan and it may reflect in your bank statement. In the end, it is going to reflect in your application and that can impact your pre-approval. Thus, for the time being, avoid making such purchases.
Avoid Going Over Your Budget for Pre-approval
Now you need to understand that the pre-approval mortgage amount may be more than what you need. For example, you may get $200,000 pre-approved instead of $150,000. No doubt that this will give you an extra room to cover additional upscale in the price.
But if you end up buying an expensive home because you have a higher mortgage loan pre-approved, it is going to affect you in the future. You will also have to pay a larger monthly installment if the same amount gets approved for the actual mortgage. That can create a big issue to sustain a good Lifestyle. Thus, be wise, and even if you get a higher amount of mortgage approved, stay within your budget.
Avoid Changing or Leaving Job
You provide your employment details when you apply for mortgage pre-approval. It needs to stay that way until the application is finalized. Thus do not change your job or do not quit your job when your application is underway. Take such steps once the deal is closed or you can do it before you apply for the mortgage pre-approval.
Control Your Finances and Avoid Taking Credit
Your credit score matters when you are under the process of getting a mortgage loan pre-approved. You need to avoid getting any extra loan or any additional debt even as a co-signer for your family. If your debt level increases, your credit score will reduce, and that will lead to a higher interest rate. You will be stuck up with that until you renew your mortgage after a few years. So, it is better to avoid taking any additional debt for the time being.
The Bottom Line
Getting pre-approved for a mortgage is the first step that you take to build your dream house. Thus plan well, ask for help when needed, consult an expert, and make sure that you submit all of your information correctly. Once you have given the application for pre-approval all you have to do is sit back and relax. I hope this article has helped you to clear doubts about pre-approval. Let us know what you think in the comments below.