Mortgage Pre-Approvals – What You Should Know
Many REALTORS® prefer their clients to have a mortgage pre-approval to know that they are a qualified buyer, and to understand their maximum borrowing capacity.
Pre-approvals: What you get
Before you start looking at potential properties, it’s important to know what price-range you’re qualified for. The lender will ask how much you’re prepared to put down and will require various documents to determine your pre-approval amount, including list of assets, income, debts, proof of employment, etc.. And if you’re self-employed, a notice of assessment from the Canada Revenue Agency for the past 2 years is required.
With a pre-approval, you and your REALTOR® have a better understanding of what properties are within your price-range, keeping in mind additional costs are required for closing. A pre-approval allows you to get an estimate on mortgage payments and lock in an interest rate for 60-130 days, depending on the lender.
Pre-approvals: What you don’t get
A pre-approval does not guarantee a mortgage as there are additional items to be considered before transitioning from pre-approved to approved. The lender will require additional information as you start considering a property to purchase. Specific property details such as condo fees, may alter the pre-approval amount. Therefore, it’s important to keep your lender informed as you look at properties and prepare to submit an offer.
Connect with your lender and REALTOR® early if you’re looking to purchase property to ensure you’re prepared and understand your maximum borrowing capacity.