Why Get Pre-Approved for a Mortgage?
Know What You Can Comfortably Afford
It’s easy to focus on the purchase price of a home, but your monthly mortgage payment is only part of the financial picture.
During the pre-approval process, we can look at your potential mortgage payment along with property taxes, heating costs, existing debt obligations and other homeownership expenses. This helps you establish a price range that makes sense for both your qualification and your day-to-day budget.
Shop for a Home With More Confidence
Once you understand your approximate purchasing power, you can focus your home search on properties that fit within your budget instead of falling in love with a home only to discover the financing doesn’t work.
A pre-approval can also demonstrate to your real estate agent and a seller that you have already taken steps to arrange your financing.
Potentially Hold an Interest Rate
Depending on the lender and mortgage product, you may be able to secure a rate hold for a set period while you look for a home.
This can provide some protection if mortgage rates increase during your search. If rates improve before you purchase, I can also review the available options with you rather than simply assuming your original pre-approval is still the best choice.
Identify Potential Issues Early
One of the biggest advantages of starting early is having time to address problems before you have an accepted offer and a financing deadline.
If there are concerns involving credit, income documentation, debt levels, your down payment or another part of your application, we can identify them and determine what may need to be done.
What Does a Mortgage Broker Do During Pre-Approval?
My role is not simply to tell you how much you can borrow.
I’ll review your financial situation, discuss your home-buying goals, explain your mortgage options and help you understand how lenders are likely to look at your application.
With your consent, I will also obtain and review your credit report. Your credit history is an important part of a mortgage application and can affect which lenders and mortgage products are available to you.
Every borrower’s situation is different. Whether you’re buying your first home, moving to your next home or have a more complicated income or credit situation, the goal is to develop a mortgage strategy that fits your circumstances, not simply fit you into a standard product.
A Step-by-Step Guide To Pre-Approval
1. Initial Consultation
We’ll start with a conversation about your plans.
I’ll want to understand things such as:
- What type of home are you considering?
- What price range are you thinking about?
- How much have you saved for your down payment?
- What does your income and employment look like?
- What debts or other financial obligations do you currently have?
- What monthly payment feels comfortable to you?
This gives us a starting point for determining what may be realistic.
2. Review Your Financial Picture
Next, we’ll go through the information lenders use when assessing a mortgage application, including your:
- Income and employment
- Credit history
- Existing debts
- Down payment
- Assets and liabilities
- Ongoing financial obligations
I’ll also obtain your consent before accessing your credit report.
3. Gather Your Documents
The documents required will depend on your situation, but they may include:
- Employment letters
- Recent pay stubs
- T4 slips
- Notices of Assessment
- Bank or investment statements
- Proof of down payment
- Information about existing loans or debts
If you’re self-employed or have non-traditional income, additional documentation may be required.
I’ll let you know what is needed so you aren’t left trying to figure it out on your own.
4. Determine Your Potential Mortgage Budget
Once I have a clear picture of your finances, we can determine approximately how much mortgage you may qualify for and what that translates to in terms of a potential purchase price.
From there, we’ll look at estimated mortgage payments at different price points, along with other homeownership costs that should be considered when setting your budget. The goal isn’t simply to determine the maximum amount you can qualify for. It’s to help you understand what those numbers look like in real life and find a price range that feels comfortable for your monthly budget.
5. Review Lender and Mortgage Options
Mortgage qualification isn’t identical from one lender to another.
Part of my job as a mortgage broker is to consider available lender and product options based on your specific situation, rather than looking only at a single mortgage.
Where appropriate, I can submit your application for a lender pre-approval and/or rate hold.
6. Receive Your Pre-Approval
Once your pre-approval is in place, we’ll review the details together so you understand:
- Your approximate maximum mortgage amount
- Your potential purchase price
- Your expected down payment
- The rate hold, if applicable
- Any lender conditions
- Documentation that may still be required
Then you can start your home search with a much clearer understanding of your financing.
What Do Lenders Consider During Pre-Approval?
Several factors can influence your ability to qualify for a mortgage.
Credit History
Your credit report provides lenders with information about how you have managed credit in the past. Your credit score, payment history, existing balances and overall credit profile can all be considered.
Income and Employment
Lenders need to verify that you have sufficient and reliable income to support the mortgage and your other financial obligations.
If you are self-employed, work on commission, receive bonuses or have income from multiple sources, your income may need to be documented differently.
Existing Debt
Car loans, lines of credit, credit cards, student loans and other debts can affect how much mortgage you qualify for.
Down Payment
The size and source of your down payment are important parts of the mortgage application.
Your down payment may come from savings, investments, the sale of another property or other acceptable sources, depending on your circumstances and lender requirements.
Assets and Liabilities
Lenders may also consider your overall financial position, including savings, investments, properties, loans and other financial obligations.
selling an existing property, providing additional documentation).
You’re Pre-Approved. Now What?
Getting pre-approved is an important milestone, but it doesn’t mean you should stop thinking about your financing while you shop for a home.
Stay Within Your Budget
Use your pre-approval as a guide when looking at homes. Just because you may qualify for a particular amount doesn’t necessarily mean you need to spend the maximum.
Keep Your Finances Consistent
Your financial situation will be reviewed again before your mortgage receives final approval.
Between pre-approval and closing, try to avoid making significant financial changes without first speaking with me.
Contact Me Before Making Major Changes
If you’re thinking about changing jobs, taking on a new loan, financing a vehicle or making another major financial decision, contact me first.
A seemingly routine change can sometimes affect mortgage qualification.
Get Final Approval Once You Find a Home
Once you have an accepted offer, the mortgage moves from pre-approval to the final approval stage.
At that point, the lender will review both your current financial situation and the property you are purchasing. You’ll also need to satisfy any lender conditions before the mortgage can be finalized.
Mortgage Pre-Approval Do’s and Don’ts
Do:
- Keep paying your bills on time. Maintaining your credit profile is important throughout the home-buying process.
- Keep your employment and income as stable as possible.
- Continue saving. In addition to your down payment, you’ll need funds for closing costs and other expenses associated with buying a home.
- Keep your financial documents organized. Updated documents may be required once you purchase a property.
- Tell me if something changes. If your job, income, debts or down payment changes, let me know as soon as possible.
- Ask before making a major financial decision. A quick conversation beforehand can help prevent an unexpected mortgage qualification issue.
Don’t:
- Take on significant new debt without checking first. A new car loan, line of credit or financed purchase can affect how much mortgage you qualify for.
- Apply for multiple new credit products unnecessarily.
- Miss payments. Continue paying all of your financial obligations on time.
- Make significant changes to your employment without discussing the potential impact.
- Assume your pre-approval is a guarantee. Final mortgage approval depends on both your financial circumstances at the time of purchase and the property you choose.
Pre-Approval vs. Final Mortgage Approval
This is one of the most important distinctions for homebuyers to understand.
A mortgage pre-approval looks primarily at your financial situation and provides an indication of the mortgage you may qualify for.
A final mortgage approval happens after you have an accepted offer on a specific property.
At that point, the lender considers the complete application, including the property, and confirms that all required documentation and financing conditions have been satisfied.
That’s why I recommend including an appropriate financing condition in your offer when circumstances warrant it, even if you have already been pre-approved.
Ready to Start Looking?
Before you start scrolling listings or booking showings, let’s make sure you understand what you may qualify for and what you’re comfortable spending.
No pressure. We’ll start with your numbers and figure out the next step.
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Everyone is welcome here.
I proudly serve clients of all backgrounds, identities, family structures, faiths, abilities, and life experiences. My goal is to provide a respectful, accessible, and supportive mortgage experience for every client.
Address:
338 Waterloo St unit 8
New Hamburg, ON
N3A 1T6