The home buying process shouldn’t start with a series of open houses. And while it should include a budget, you won’t have a good one without personalized feedback on what your mortgage payment would be. This is why your first step after deciding you want to buy a property is to seek mortgage pre-approval.
What is mortgage pre-approval?
Mortgage pre-approval isn’t approval for a mortgage. It requires many of the same steps, such as gathering up tax returns and pay stubs along with pulling a credit report. A mortgage pre-approval gives you an idea of how much home you can afford and a maximum house payment you’d be dealing with.
Why might a mortgage application be denied after mortgage preapproval? If you lost your job, you’re obviously not going to be able to make the house payment. If you go on a spending spree before you close on a new property, lenders will worry about your ability to pay the house payment. Mortgage approval is also based on the suitability of the property itself. A property that’s in bad shape isn’t considered a good investment, and the mortgage company is going to have a major stake in any home you buy. They may also refuse to back the purchase of non-conforming properties, properties that will be difficult for them to sell if you default on the mortgage.
When mortgage rules change, especially if existing mortgage pre-approvals aren’t grandfathered in, you may find yourself ineligible. A lot of home buyers found that they couldn’t buy homes after the mortgage stress tests went into effect, while others were priced out of the market by increased down payment requirements and ceilings on mortgage amounts. Fortunately, the Fort McMurray real estate market wasn’t as affected by these rules as overheated real estate markets like Vancouver and Toronto were.
What are the benefits of mortgage pre-approval?
You’ve gone through a formal vetting process, and that’s a point in your favor with real estate agents and home sellers. They know you can afford the home, and they know you aren’t wasting their time with offers you can’t follow up. Furthermore, pre-approval means you’ll be able to secure financing far faster than someone who hasn’t gone through the pre-approval process. That allows you to close on homes faster and it makes you the first choice for home sellers who need to sell their homes ASAP. The mortgage approval process is faster for you, too, because you’ve already submitted so much paperwork. There will be a quick check of your employment status and a secondary credit report run.
Mortgage pre-approval gives you the information you need to budget for your new home purchase. How large does your down payment need to be? How much will your monthly mortgage payment be? Mortgage pre-approval’s biggest benefit is that it allows you to lock in today’s interest rates via a rate-hold. The rate hold ranges from 30 to 120 days, but it protects you from a higher house payment if interest rates spike. If interest rates fall, lenders will match the lower interest rate because they know you can take your business elsewhere.
Mortgage pre-approval can save you from the nightmare of extending an offer on a home only to find out that errors on your credit report make you ineligible for a mortgage. You can clean up your credit report or take steps to improve your credit before you go home shopping. This occurs with ten to twenty percent of Fort McMurray home shoppers.
Talk to our Fort McMurray mortgage experts at Whalen Mortgages Fort McMurray to learn more about the mortgage process and what it takes to get you into your dream home.