Mortgage Pre-Approval Process
Tags: MORTGAGE PRE APPROVAL PROCESS, MORTGAGE PRE APPROVAL ONTARIO
Do you know what the mortgage pre-approval process is? The easy explanation is that it's pretty well exactly what it sounds like. The more important question is do you know what to do and why it's so important that you go through the mortgage pre-approval process before you start your in-depth home search?
Lets start with what to do and what will happen at each step. Your first step is easy; Make an appointment with your bank or a mortgage broker. At your appointment they’ll ask you questions pertaining to your income, your credit and how much you have saved and of that what down payment you have available.
The representatve you have chosen will then check your credit through one of two credit monitring services with the information you’ve provided and they will give you a letter/document stating the maximum amount of a mortgage you’re qualified for. In other words the mortgage pre-approval process tells you how much house you can afford by the amount of money you can borrow.
Your lender will provide you with not only an amount you can borrow but also a guaranteed interest rate typically for anywhere from 90 to 120 days. This will more than likely give you ample opportunity and time to look at properties. If interest rates decrease before you purchase your new home and solidify your mortgage, you’ll get the better of the two rates. If rates go up, as they have been lately, you will still be able to lock in at the rate you were guaranteed, as long as it’s within the time specified.
For ease of explanation, if you were looking to purchase a home for $550,000.00 with a 5% down payment your approximate monthly payment at 3.15% (which you went through the mortgage pre-approval process to get) would be $2513. If interest rates were to rise by a half point which they have recently your payment would then be about $2650. So the quick math is 2650-2513=137/ over a 5 year term (60 months) you would have either cost yourself or saved 137x60=$8220.00. That's a pretty serious chunk of change.
Getting pre-approved and having your pre-approval letter is a key component while house hunting. It tells you exactly what price range of home to look at, which will save you both time and money and it allows you to have a much stronger negotiating position. Going through the mortgage pre-approval process allows you to have an upper hand over any potential competitive buyers since your financing has already been pre-approved. If you have any questions regarding a mortgage pre-approval in Ontario or other real estate topics, please reach out, we're here to help.