Getting Pre-Approved for a Mortgage
For most of us considering buying a home, a mortgage will play a large role in the financing of this purchase. Pre-approval of a mortgage is simply having your lender review all of your financial information and determining the maximum amount of money you can borrow.
Why Get Pre-Approved?
- You know exactly how much you can borrow, so you can tailor your home search to properties you can realistically afford.
- The Lender will generally guarantee their interest rate to you for a period of 60-90 days - some even up to 120 days. This way, if rates increase, you are able to take advantage of your pre-approved lower rate.
- Pre-approval gives you a competitive advantage when making an offer on a home because the seller knows that you have qualified for a loan. In a situation where there are multiple offers this is imperative.
- Once you have made an offer on a property and are ready to apply for your mortgage loan, you can save time because much of the paperwork has already been completed.
What Information Will be Required?
- Personal information such as marital status and number of dependents.
- Employment details, including T4 assessment and letter from employer verifying your salary.
- Investment and banking information (i.e. - RRSP, Mutual Funds, Stocks).
- Details of your assets (i.e.- a car, boat, any other property)
- Information on loans and other liabilities (i.e. lines of credit, car payments, support payments)
- Canada Revenue Agency NOA's or T2 if you are a corporation, or at least proof of having filed your taxes.
- Permission to do a Credit Check.
The mortgage market is currently very competitive. Many Banks, Credit Unions, and Mortgage Brokers will reduce their posted interest rates in order to gain your business. A small discount in your interest rate can make a huge difference in the long-term interest amount you will be paying over the course of your amortization and term.
Don't forget to ask for the terms associated with the mortgage you will be signing for: while a low interest rate is very attractive, it is important for you to know what strings, if any, are attached with the offer you are receiving. For example, ask the following questions:
- are you able to port your mortgage onto another property within your fixed term? would you need to pay any penalties for doing so and if yes, how much and how would it be calculated?
- how often can you change your mortgage payment frequency?
- how much of an anniversary payment are you allowed to make per year?
For more detailed information about the what and how of a mortgage, please visit this website: