Getting a mortgage pre-approval is not difficult, but it is vital. You are more likely to get a good rate on your mortgage if you follow these simple tips.
Mortgage Pre-Approval Tips
1. Apply First
Pre-approving for a mortgage should be the first step when buying a house instead of contacting a real estate agent, many Canadians believe. Being pre-approved will save you time as it eliminates an extra step in the process if you find a home you love and want to make an offer quickly.
2. Search all over for the Best Mortgage Pre-approval Rate
You’ll find that there are several different properties to choose from before you decide on the one that’s right for you. So, it’s important to shop around and compare mortgage rates in order to get the best deal possible.
You can expect to receive a good deal from your local bank branch if you do your homework first and compare mortgage rates. However, another option would be to use a mortgage broker who will negotiate on your behalf instead of just going straight to your local bank branch.
What comes after your mortgage pre-approval is pending? Your rate will be kept on hold for you for 90 to 120 days, which is when you should start looking for a place to live!
3. Gather Your Documents
Pre-approving for a mortgage and applying for one takes time, so it’s better to start sooner than later. Speak with your mortgage broker about what papers are required to finalize your loan, and begin collecting them in one place. Here is a list of some things you will more than likely need:
- ID
- Statements for your bank account and investments
- Asset proof
- Income proof
- Debt information
4. Stay in Touch with your Broker
Staying in touch with your mortgage broker is key if you want to avoid any mix-ups with your paperwork. If they can’t get ahold of you, they might make the wrong call about something and end up rejecting your pre-approval. To ensure that doesn’t happen, work with a mortgage team. They are licensed experts at what they do and will help you every step of the way.
Mortgage Pre-approval Tips – The Bad
Although having good intentions is vital, sometimes making silly mistakes can be just as harmful. To prevent this problem and get pre-approval, follow these four guidelines:
1. Don’t get a Mortgage Pre-approved in Excess of Your budget
Don’t just set your maximum purchase price at the top of your mortgage pre-approval: base it on how much you can afford monthly, including other estimated costs.
2. Don’t Make Other Major Purchases
Your loan officer will need certain paperwork from you in order to pre-approve your application. Your financial status during this time shouldn’t change, or else it might lead to loan rejection after you were previously approved. To prevent being rejected, don’t make any large purchases that would significantly affect your debt servicing ratios.
3. Avoid New Credit Applications
Furthermore, avoid applying for new types of credit before buying a house like a personal loan or a new credit card. Also, don’t co-sign your friend or family member’s loan. Your mortgage pre-approval is influenced by both your debt level and available credit–increasing them might lead to complications with your already approved status.
4. Avoid Quitting or Switching Jobs
In short, don’t switch jobs or become self-employed after you’ve been pre-approved for a mortgage. Most mortgage applications require proof of income, so changing your job status may lead to delays or rejection of your application. If possible, wait until after you buy the house to make any switches. That being said, we understand that sometimes opportunities come up that are too good to refuse – in which case, read our advice on how to handle this without risk below.
