Mortgage Pre-Approval
A mortgage pre-approval is a great first step when deciding to look at homes and purchase a new property. The pre-approval will give you guidance on what you can afford and therefore what price range you should stay within.
Common Questions:
I Have a Pre-Approval, Do I Need a Condition of Finance?
Once you have found a property you love you will want to make an offer to purchase the property .
I always recommend my clients have a condition of finance on their offer to purchase. Why? Well a pre-approval often times is not underwritten. What that means is that a computer generally confirms the pre-approval mortgage amounts and does not confirm anything on the application. Normally a human does not even take a glimpse at your pre-approval application. Whereas with a true mortgage approval many documents will be needed before a mortgage is secured for you. Documents are needed to confirm your income, down payment, the property etc. If any of these documents are not sufficient to the lender then you may be declined and can be sued for not fulfilling your offer to purchase.
Are there any other Benefits of a Pre-Approval?
A pre-approval will also hold an interest rate for you. This protects you if interest rates were to increase while you are searching for the perfect property. Pre-approval interest rates are typically held for 90 to 120 days depending on the lender. From my experience this is usually a sufficient amount of time when a purchaser is actively seeking for their home. If you end up needing more time and your pre-approval expires then we would need to resend in a pre-approval application.
How do I get a Firm Mortgage Approval?
You can only get a firm mortgage approval once you have an accepted offer to purchase on a property. This is why I highly recommend my clients put a condition of finance on their offer to purchase. I repeat -you can only get a firm approval after you have made an offer on a home and the offer is accepted - sounds kind of crazy but it is true.
Once you have the accepted offer to purchase, I will submit your mortgage application to the lender right away. I can get a true mortgage approval in as little as 24 business hours. It is best to have your documentation to me ahead of time to make the process as smooth and efficient as possible. When you have a condition of finance you will have a deadline you need to meet, and if it is not met in time you can lose out on the property.
If the lender approves your mortgage application they will provide us with a formal mortgage commitment that usually has a list of conditions you will have to meet as well the mortgage terms. Common Mortgage Conditions Are: - Confirmation of Income (A lender will need proof of the income you stated on your application) - Confirmation of Down Payment - Fully Executed Purchase and Sale Agreement - Property Appraisal to Confirm the Homes Value - Proof Your Income Taxes are Up To Date - Signed Commitment and Documents to the Lender A lender can retract their commitment to you at anytime before you have satisfied all of their conditions on the commitment. How can I help You? Getting a pre-approval is generally a pretty quick and easy process. I personally like to spend time really going over your application to limit any issues in the future when you need a firm mortgage approval. I have had many clients referred to me that got a pre-approval elsewhere and then once they put an offer on their dream house they were declined. This should not be happening as often as it does, but when a mortgage agent does not take the time to review your information themselves many important factors can be missed and you could be left in hot water if you did not have a condition of finance, or at the very least you will be left very disappointed. For more information you can set up a phone meeting, or a meeting at my office!
I hope this information was helpful,
Tess Arpa
Mortgage Agent
Excel Mortgage Cambridge Ontario
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