11/11/2021
Why you should get pre-approved before starting your home search?
Home buying is an exciting endeavour for most people. As a home buyer, you get to spend time visiting new homes, visualizing your new living space, and getting caught up in the small but exhilarating tangible details such as the amenities in the immediate neighbourhood – schools, cafes, restaurants, and shopping. For this reason, it’s easy to forego and forget about one of the most important steps in the home buying process – the mortgage pre-approval.
Afterall, there is nothing particularly interesting about getting a mortgage. The mortgage process can be tedious, but it is fundamentally the most important step in the home buying journey. Accordingly, home buyers should firstly obtain a mortgage pre-approval, check with their mortgage broker on how much they can afford, figure out their budget and subsequently, reach out to their realtor and begin the physical home shopping process.
Why is getting a mortgage pre-approval the most important initial step in the home buying journey?
Looking at homes without a mortgage pre-approval is like putting the cart before the horse. Without a proper mortgage pre-approval by a mortgage broker, knowing your budget is impossible. A quick search on Realtor.ca can yield varying results. Surely, you could be looking for homes in the $500,000 $550,000 range or in the $800,000 to $850,000 range. To avoid wasted energy, effort, time and to narrow your search further, the initial questions to answer should be how much mortgage will I qualify for and how much down payment am I ready to put down?
You might be basing your budget based on the amount of your down payment. However, a down payment is only one of the pieces of the mortgage puzzle. Some additional factors that banks consider prior to issuing an approval are your debt to service ratio, your income, your credit score, as well as the property. For an expert opinion on your budget and qualification details, you will need to speak with a mortgage broker who can assess your assets, liabilities, income, and credit and present you with mortgage options accordingly. They will ask for income documents and look at your credit score.
Realtors will be more willing to work with you:
One of the biggest sources of frustration for realtors is spending time with and showing homes to home buyers who fail at securing mortgage financing. Most likely, the realtor will spend hours with home buyers, showing them properties, answering their questions without anything coming to fruition. Naturally, realtors look to protect their time and energy against buyers who are not serious and those who do not have a pre-approval in place. For this reason, having a pre-approval in place will also help you select competent and professional realtors who are looking to work with serious buyers.
Required documents:
To get started with your mortgage pre-approval application, you will need to gather some relevant documents on your income, down payment, and assets. If you are a salaried employee, last 2 pay stubs along with a letter of employment will be sufficient. If your income type is classified as fluctuating (hourly, commissioned sales, overtime, bonus, self-employed income), you will need to gather your last two tax years’ T1 Generals and Notice of Assessments along with a few additional relevant documents. For more information regarding some of these additional documents, please refer to your mortgage broker. Lastly, most lenders look to verify the source of your down payment funds. 3 months of bank statements or investment statements will be sufficient to satisfy this requirement.
For any questions regarding your new purchase or refinance application, please reach me on (604)-355-6148 or at [email protected]
