How to get pre-approved for a mortgage
Are you ready to start looking for your future home? The first step to making your dream a reality is getting pre-approved for a mortgage. This process will help you find out your borrowing capacity, estimate your mortgage payments and lock in an interest rate for 60 to 130 days, depending on the lender.[1]
Read this article to learn how to get pre-approved for a mortgage and position yourself as a serious buyer. It will also give you a head start when it’s time to make an offer.
What’s a pre-approved mortgage?
Getting pre-approved for a mortgage means a lender assesses the maximum amount you could borrow to purchase a home. The process is based on several criteria,[2] including:
- Your financial situation
- Down payment
- Property value
During this process, you’ll need to provide your personal information and various documents. The lender will also check your credit score.
How to get pre-approved for a mortgage
Contacting multiple lenders or mortgage brokers lets you shop around for the product that best suits you, at the most favourable rate.
Know that lenders will directly loan to you. This includes banks, caisses populaires, credit unions, mortgage companies, insurance companies, and trust and loan companies.[3]
Mortgage brokers, on the other hand, don’t loan you money directly. They negotiate the transaction for you. Since they have access to many lenders, they can usually offer a broader range of products. They also usually don’t charge fees for their services, but they do receive a commission at the end of the process.
3 tips for getting pre-approved for a mortgage
1. Estimate your borrowing capacity
Create a detailed statement of your income and expenses before contacting a lender. It will make it easier for you to estimate your ability to make your home owning dream a reality, based on your lifestyle. There are several available tools to help you do it, including our mortgage calculator.
2. Track your finances
Make sure you’re in a good financial position. In other words, avoid big purchases, like a car or an appliance, as it could lower your borrowing capacity. If your situation changes between when you applied and when you purchase, you may get a lower loan than the one listed on your pre-approval or even be denied.
3. Factor in other home-buying expenses
Remember that a pre-approval estimates the maximum amount you could get as a loan. However, it doesn’t factor in other expenses related to buying a home, like closing, moving and maintenance costs. Avoid unpleasant surprises by looking for homes in a lower price range.
Now you’re finally ready to embark on this amazing adventure! Consider going through a real estate broker so you can purchase your home with full peace of mind. Their expansive expertise will make your life much easier!
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See also:
5 tips on how to optimize the value of an income property
Buying a Home: What Percentage Should I Put Down?