5 mortgage pre-approval tips (the dos)
The mortgage pre-approval process isn’t rocket science, but it is very important. Read and follow these five tips and you’re likely to get a great deal on your mortgage.
1. Apply for a mortgage pre-approval first
Most Canadians think the first step in the home-buying process is to contact a realtor and start looking at homes. This isn’t correct. The first thing you should do is apply for a mortgage pre-approval. After all, if you find a home you like, you’ll want to move quickly. Being pre-approved for a mortgage removes an extra step in the process.
Being pre-approved also helps you know how much you can afford to spend. You can get a good estimate of how much you can afford with our mortgage affordability calculator. However, the hard limit will always be how much the bank will approve you for – a mortgage pre-approval gives you that.
How long does it take to get a mortgage pre-approval? It can be done within an hour if you have your documentation together. Get in touch with a mortgage broker near you to get started.
2. Shop around for a great pre-approval rate
Just as you’ll see several homes before settling on ‘the one’, you should shop around for the best mortgage rate. Don’t just go to your local bank branch and expect to receive a great deal. Do your research and compare mortgage rates, or use a mortgage broker who will negotiate on your behalf.
Even half a percentage point can make a huge difference in your regular payments and the amount of interest you’ll pay over time. To see what we mean, plug in your numbers into our mortgage payment calculator, then change the interest rate in small steps. You’ll very quickly see what we mean!
What happens after your mortgage pre-approval? Generally, you’ll have a 90 to 120 day period where your offered rate will be held for you. This is when you should start house hunting!
3. Assemble your documentation
Collecting the documentation needed for a mortgage pre-approval and application can take time – it’s best to get started early. Ask your mortgage broker what documents are required to finalize your mortgage, and start gathering it all in one place.
Here’s a typical list to get you started:
- Identification – to prove you are who you claim to be.
- Bank account and investment statements – to prove you can pay your monthly payments.
- Proof of assets – like a car, cottage, or boat.
- Proof of income – pay stubs or a letter from your employer will do. A notice of assessment will be needed if you’re self-employed.
- Information about your debt – this includes student loans, car loans, and credit cards. Lenders have access to databases of this information, and it will look bad if you try and hide it.
4. Stay in touch with your broker
Stay reachable, in case your mortgage broker has any questions about your documentation. This means avoiding vacations or business trips where you won’t have access to email or phone. If you aren’t available, they may make assumptions about your intent, and reject your mortgage pre-approval. If you absolutely must leave town, make sure to inform your mortgage broker in advance.
5. Read the fine print
Once you’ve been pre-approved, your loan officer will send through your pre-approval document. This document will outline the interest rate you’ll receive, the loan terms, and the mortgage amount you’ve been pre-approved for. It may seem like financial jargon, but it’s important to read the fine print on every page carefully. If you have a family lawyer or accountant, it’s a good idea to have them take a look as well.
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