If you’re currently searching for a home in Barrie or around Simcoe County, you’ve likely heard that it’s advisable to get pre-approved before your search begins. Getting pre-approved for a mortgage definitely helps – not only does it make the financing process a little easier, it also gives you a solid idea of how much house you can actually afford (preventing you from falling in love with your dream home, only to find it’s out of your price range).
Before you go ahead with pre-approval, you’ll need a better understand what a pre-approval is, what it involves and what it isn’t. Here’s a handy guide to help you out:
What exactly is a pre-approval?
Basically, a pre-approval is a written estimate of the maximum amount that your lender may be willing to lend, as well as the interest rate that will be attached to this loan.
It’s important to note that a pre-qualification is not the same as a pre-approval. In comparison, a pre-qualification is much less formal and does not involve verifying a potential borrower’s financial circumstances.
Why should I get pre-approved?
When it comes to pre-approvals, there are quite a few benefits. In addition to providing you with a pretty accurate budget and price range for your new home, having a pre-approval in place can also help you stand out from other potential buyers as you’ll appear more serious, credible, and ready to make an offer. Another great thing about pre-approvals – they also typically come with a 90-day to 120-day guarantee. This means that if interest rates rise suddenly (which they are predicted to do in 2018), you’ll be locked in at the interest rate quoted in your pre-approval.
What will I need to get pre-approved?
Pre-approval requires you to provide quite a few documents to your potential lender, so it’s best to get this ready beforehand. You’ll need:
- Letter of employment – detailing how long you have worked for your company, your current salary and how many hours you work per week
- Notice of assessment from the CRA (Canada Revenue Agency)
- T4’s from previous assessments
- Two recent paystubs
- 90-day history of bank statements
Are you self-employed? For those who work freelance or own their own business, you will also need to provide the following:
- Statement of business activities
- Three years of CRA assessments
- T1 Generals from the previous two years
- Incorporation license (if applicable)
What else should I know about the pre-approval process?
One last, important thing you should know about mortgage preapprovals is that they are not a guarantee. Even though a potential lender may estimate an amount and an interest rate, nothing is finalized or set in stone until the mortgage is finalized and approved.
Still have questions about mortgages and getting pre-approved? I’d love to help. As an experienced mortgage broker in Barrie, I’m dedicated to helping my clients find the best rates and the best mortgage solutions to fit their individual needs. Connect with me today at 705-315-0516 to set up an appointment.