As you settle into Canada, homeownership is considered by most people. Being a homeowner is a life-long dream of many Canadians, but there are specific steps and processes to go through before it becomes a reality. With all-new experiences, there’s uncertainty; you will converse with realtors, look at homes, worry about bidding wars, and of course, actually qualify for a mortgage.
As you navigate the home buying process, it is vital to understand certain essential terms used by mortgage lenders, the most critical being pre-approval.
Applying for pre-approval is an excellent way to begin the journey of homeownership. Pre-approval is the most crucial step; it is the first or preliminary evaluation of a lender’s potential borrower.
If you are pre-approved, it means that a lender has approved you for a mortgage loan on the basis of the information and documents that you have provided. Pre-approval often specifies the term, interest rate, and principal amount.
Pre-approval can provide the potential borrower with an estimated amount they can afford to spend on their new home and their estimated monthly payment, i.e., it is helpful for the borrower to know their affordability.
Getting a pre-approval is one of the best things you can do to ease the process and give yourself a boost, confidence in your buying power.
Here are the things that can get you in trouble or stay you away from the trouble, do’s and don’ts of mortgage pre-approval;
1. Apply for a mortgage pre-approval first
Applying for a mortgage pre-approval should be the initial step to begin the process rather than contacting the realtor and looking for the home. As pre-approval helps you know your affordability, you can get a good estimate about your spending.
2. Look around for an excellent pre-approval rate
Just as you see several homes before finally settling in one, similarly, it is ideal to look around, shop for the best mortgage rate. Extensive research, negotiation, and comparison will help find the best rate, as even half a percent can make an enormous difference in your monthly payments and interest over the mortgage term. Pre-approval enables you to hold the rate for 90-120 days, which is ideal for house hunting.
3. Collect your documentation
Make a checklist of the documents required for the mortgage to avoid missing any document. Some of the essential documents include ID proof, bank account statements, credit report, credit score, proof of income and assets, and debt information.
Never hide any information from the lender as they have access to your information, and untrue or false information can lead to immediate rejection of the pre-approval application.
4. Stay in touch with your mortgage agent
Make sure to stay connected with your mortgage agent as they might require some information or documents. Being unreachable can often doubt your intent and ultimately lead to refusal of mortgage pre-approval.
5. Read the final document carefully
Once your pre-approval has been approved, you will receive a document with all the details like the mortgage term, amount. It is essential to read the document carefully before moving ahead.
1. Don’t get pre-approved over your budget
Do your calculations and ascertain an amount you are comfortable spending each month. Don’t forget surplus costs associated with homeownership apart from mortgage. Always make sure to buy below the maximum price approved in the mortgage pre-approval.
2. Hold off on major purchases
The financial position should remain the same throughout the process from pre-approval till the end of the mortgage. Change in debt ratio due to new purchases can often lead to the mortgage’s refusal even if pre-approval had been approved, so complete stay away from new significant purchases like a new car, bike, etc.
3. Don’t apply for new credit
Applying for a new loan, new credit, or co-signing a loan for someone can risk your pre-approval, so it is better to keep away from it.
4. Don’t quit or change jobs
Bid goodbye to the employment status changes till the end of the mortgage process or until you have keys to your new home. Steady and regular income is crucial, and any change in job or income can cripple the entire process.
If, in the worst scenarios, you have been laid off from the job, delay your home buying decision until you restore your financial stability.
The path to success is paved with good intentions, but sometimes also laid with silly mistakes. With complete knowledge of do’s and don’ts, you can be confident your buying experience will be successful.
Let your dream of homeownership take a flight. Call our Mortgage agent today to know how we can help you own a home of your own.