Saturday, July 31, 2021 03:38

Get Pre-approved Today

The Pre-Approval

The first step in your Mortgage journey, after you have decided that homeownership is right for you, should be to obtain a Pre-Approval.
Pre-Approvals are great for two reasons.

1. A Pre-Approval will give you a clear understanding of how much you can afford to buy. More so by talking to the team you will get a better understanding not only of how much you are pre approved for, but more importantly how much you can afford.

2. Pre-Approvals not only help you determine what price range you should be shopping in, but they also come with an Interest Rate Guarantee.  This means that for the period that your Pre-Approval lasts (usually 120 days) you are guaranteed the lowest rate offered by the lender. If rates go up, you still have the same rate you were Pre-Approved with. If rates go down, then you will get the lower rate.

What You Should Know About Getting Pre-Approved

– Pre-Approvals come with no obligation and are completely FREE
– You are guaranteed the lowest interest rate for the entire commitment period
– It only takes 10 minutes to fill out the Pre-Approval application

Pre-approval amount

This amount can vary depending on the product and mortgage company.  As a mortgage broker we shop the different lenders to find a product that meets your needs.   Generally speaking lenders do not want you to spend more than 35% of your income on your housing expense.  Housing expenses include your mortgage payment of principal and interest, property taxes, condo fees and an amount for heat. We call this calculation the Gross Debt Service (GDS) Ratio.  To this amount we  add your monthly payments for any loans, lines of credit or credit cards. This additional Ratio is called the Total Debt Service (TDS).  This amount together with your housing expenses cannot be more than 42% of your gross income.  If you have a high credit score some lenders do allow you to go a little higher than 42%, we strongly suggest you do a budget so that you do not overextend yourself.

Benchmark interest rate

This is a rate that the finance minster introduced in April 2010.  The Benchmark Interest Rate  is the rate that the minster wants all high ratio borrowers (clients who have less than 20% downpayment) to qualify on for terms 1 to 4 years and for the variable rate mortgage.  The thinking is that the variable rate will increase and they want to protect you when your mortgage comes up for renewal in 1 to 4 years so that you can still afford your mortgage.

What Do Lenders Look For?

A Pre-Approved mortgage is based on the information you provide on the application. The lender is assuming without verifying that the information you provided are accurate and verifiable.
Lenders typically will look at 5 main factors when reviewing a mortgage Pre-Approval
1. Who You Are
2. Your Employment History
3. Your Income
4. Your Credit History
5. Your Debts

What a Pre-Approval Doesn’t Do

It is important to note that while we strongly recommend getting Pre-Approved for a mortgage, it is not a substitute for a mortgage approval.  You should be wary about waiving any financing condition on a Purchase Agreement in lieu of having a Pre-Approval.
The reason for this is while a Pre-Approval will tell you what you can afford based on a number of factors it does NOT take into account the actual property you are purchasing. Lenders have guidelines for properties that must be met regardless of how well qualified you are as a borrower.
Also keep in mind that Pre-Approvals do not require any documentation to prove your income or other information that you used to apply. While you may earn enough to qualify for the mortgage if you are unable to confirm this information in a manner which is acceptable to the lender your Pre-Approval won’t matter very much.
The bottom line is make sure you are working with a Mortgage Expert who can make sure all your mortgage needs are been met. This will make your experience much more enjoyable!