What do you do With a Mortgage Pre-Approval?
You’ve been told you should obtain a pre-approval before doing a home search, but why?
Obtaining a pre-approval from your Mortgage Broker allows you a sense of comfort and confidence in your home buying process.
A formal pre-approval requires you to submit your financial information so the mortgage broker can review it for suitability and affordability purposes.
Once your broker has finished their initial review, they will send your file to a lender for review and to obtain the pre-approval letter that typically is valid for 120 days, but this may vary from lender to lender.
What Does the Pre-Approval Provide You?
- Max Borrowing Capacity;
- You will know the max mortgage amount you can borrow, so the only financial variable remaining is how much down payment you can produce.
- Makes Your Realtor Happy;
- A good real estate agent won’t work with anyone who doesn’t have a mortgage pre-approval, as they won’t know what is actually feasible for you.
- Rate Hold;
- If the market is in an inclining interest rate scenario, your pre-approval locks your interest rate in for up to 120 days which allows you to save a little money should rates increase.
With that said, there are some things to keep in mind that a pre-approval cannot cover. These will be matters your mortgage broker can discuss with you before you buy.
What does a Pre-Approval NOT cover;
- The House is not approved;
- Your lender may not approve your live file based on the house itself or the location of the house
- The Location may change down payment;
- You may require a larger down payment if you are purchasing in a more rural location
- The House may change down payment;
- A house type that has some issues or doesn’t fit standard guidelines may impact lending guidelines.
- Large properties (acreage) can impact lending guidelines.
Therefore, before you shop, get pre-approved for your own piece of mind, and so that you can stay within a realistic purchasing price.
If you have any questions, please do not hesitate to contact me any time.
Meghan Van Houten – Mortgage Agent, Level 2