Mortgage Pre-Approval

If you require a mortgage, getting pre-approved by your lender of choice is the first step.  Getting pre-approved, will give you an understanding of how much you can borrow and therefore how much you will need as a down payment. This calculation will take into consideration closing costs and monthly payments (such as property taxes) as well. Your lender of choice will commit to providing you with X amount of funds at Y interest rates. Once you know the financial boundaries around your ability to borrow, you can make an informed offer within your “affordability” range.

Benefits of getting pre-approved:

Reduced Stress. Buying a home is likely one of the biggest purchases you will make in your lifetime. You don’t want to be scrambling at the last minute. Being prepared will help you make an informed and level-headed decision.

Make your offer more competitive. If you are well prepared before making an offer and have worked through all the issues beforehand, you will be able to focus solely on price and possession date once the negotiation process begins. This may give you an advantage over less prepared bidders.

Risks with Pre-Approvals:

Appraisals. The lender who pre-approves you, does so subject to the property you buy “appraising out.” Your lender will ask that an appraiser go through the property you have bought and report back to them. If the appraiser delivers a value to your lender that is less than what you have contracted to pay, there may be a problem getting a mortgage from that lender.

How to mitigate this risk? Depending on the situation, it might be prudent to insert a financing condition in your Offer to Purchase to protect you from such a development. Every purchase is unique. We will advise you of your options throughout the process.

Shop Around:

While you may have a pre-existing relationship with your bank, it is prudent to explore your options. Your banker is not shopping the entire lending network on your behalf. He/She is offering you their bank product only. We suggest you get a quote from an independent mortgage broker who is free to shop the entire lending market on your behalf (see our resources page for Mortgage Brokers we have used in the past).

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