Why is Mortgage Pre-Approval so Important?
Mortgage pre-approval is something that is necessary for today’s Toronto real estate market, and something we strongly recommend to all of our clients as they enter the buying market. By obtaining your mortgage pre-approval, you are better able to determine the price range of homes you can afford. There is nothing worse than falling in love with a home, only to discover that it’s out of your price range. Conversely, without a mortgage loan pre-approval, you could possibly short change yourself, and end up missing out on a home that you could qualify for.
How a Mortgage Pre-Approval Works
Getting a mortgage pre-approval means you’re preparing to take the next step in the home-buying process. Working with a mortgage specialist will give you a greater advantage in considering all of the options that are in the market today. Once you’ve selected one, a number of steps will be taken to works towards your pre-approval.
Steps to Getting Pre-Approved for a Mortgage:
- You and your mortgage specialist will discuss your financial strategy and needs, mortgage amount, down payment, purchase price, etc.
- You’ll learn about the various available mortgage options (fixed vs. variable rate, interest terms, payment options, amortization, etc.) and discuss which of them best suit your needs.
- With your consent, your mortgage specialist will take an application, which will require you to provide details on such items as employment, income, assets, down payment liabilities.
- You’ll give the lender permission to obtain a credit bureau report.
- Your mortgage specialist will advise you about the documentation (income confirmation, down payment confirmation, etc.) you’ll need to supply upon conditional approval of your mortgage. Any conditions must be met for your mortgage to be fully approved.
- Pre-approvals are subject to your continued good credit and are usually good for 60, 90 or 120 days depending on the lender.
Benefits of Having a Mortgage Pre-Approval
Not only does a mortgage pre-approval give you solid piece of mind when you enter the Toronto buying market, you’ll also have the confidence to be laser-focused on your budget. You won’t go through the emotional turmoil of falling for a home that you simply cannot afford.
But there are other benefits as well. You’ll be a very strong buyer. Having your mortgage pre-approved will help portray you as a solid buyer who is serious, and fully capable of satisfying all aspects of the purchase and sales contracts. Sellers are more likely to accept offers from buyers who are pre-approved for their load. This is incredibly helpful when you’re involved in a multiple offer situation – you’re able to go in without the condition of financing, which may give you the edge over other offers that might be higher than yours, but the bidder has not been pre-approved.
Real Estate Buying Power
We’ve been in multiple situations where a pre-approval has given our clients the edge. They were able to enter into a best-and-final bid, knowing what the top of their budget was because of the pre-approval. Having the confidence in knowing their ceiling, what their monthly payments would be, and the interest rate of their mortgage all ended in celebration as they went into contract for their dream home.
Having a pre-approval can also fast track your closing. Once you are under contract, your mortgage loan pre-approval can actually help to speed up the closing process, since much of your financial information is already in the lender’s system.
Obtaining mortgage pre-approval is free and does not commit you to anything. It’s simply a first step in the process of entering the buying market. So why would you not take advantage of it in order to position yourself at the top of the buying pack, and already outpacing some of the competition.