Getting pre-approved is an important first step whether you are considering your first purchase, transitioning into a new home, or even renewing an existing mortgage.
A pre-approval means that a lender has stated in writing that you qualify for a mortgage based on your current income and credit history. It will specify a term, interest rate, and mortgage amount that you qualify for in advance of your home shopping. Pre-approvals are good for up to 120 days and will protect you from any interest rate increases that may occur at that time.
Trust us when we say that getting a pre-approval in place will make your whole buying experience much smoother.
A pre-approval will help you to answer the question “how much house can I afford” and will eliminate a lot of stress when you find the right home.
Before you meet with your Realtor and start house shopping, it is recommended that you have a realistic price range in mind. A pre-approval gives you a firm idea of exactly how much purchasing power you have and lets the seller know that you are serious about buying, giving you a little extra leverage while negotiating.
The amount of purchasing power you have is dependent on several factors. Our mortgage professionals will ask you a series of questions relating to your specific financial situation, and you will need to provide some supporting documentation.
The key areas that we will look at for a pre-approval are credit score, down payment, income, and liabilities:
Credit scores in Canada range from 300 – 900. The higher the score, the better.
There is a credit score range that is required to qualify for a mortgage; however, it is dependent on your liabilities, down payment, and income.
How much money you are putting towards the purchase of a home and where those funds are coming from.
The minimum down payment required for a home purchase in Canada is 5% of the purchase price.
This value should be the total of the household income if you are buying the property with a partner.
Additional sources of income may be included depending on the lender. This may include bonuses, tips, investments, rental income, support payments, child tax benefit etc.
What are your monthly expenses?
This could include rent, utilities, phone bills, credit card debt, auto loans, student loans, etc.
Applying for a mortgage pre-approval is quick, free, and does not commit you to one single lender. It does, however, prepare you for your new purchase and protect you from rising interest rates for up to 120 days, giving you lots of time to shop for that perfect home.