A mortgage pre approval is something that can be obtained from a traditional bank, credit union, or mortgage broker. These different options may offer similar, overall, products but with varying interest rates and conditions.For this reason, it is important that you consider not just the rate but also the conditions to ensure that you choose the best product for your specific situation.
While this process does not guarantee your approval it can give you the confidence when setting your budget and negotiating a purchase price.
WHAT A PREAPPROVAL CAN DO FOR YOU
A preapproval is used to determine the maximum amount of a mortgage you could qualify for, estimate your mortgage payments at a given purchase price, and most importantly, lock in an interest rate for a set number of days. This can insulate you from increases in mortgage rates before you have an accepted offer on a home.
WHAT YOU NEED TO OBTAIN A PRE APPROVAL
During the preapproval process, they will look at your finances to find the maximum amount you can access and at what interest rate. Before being pre approved, you will need to provide information to prove your income, your assets, and your level of debt. They may also run a credit check to ascertain your credit score.
This information will take the form of:
a proof of your current salary or hourly pay rate (for example, a recent pay stub
your position and length of time with the employer
notices of assessment from the Canada Revenue Agency for the past 2 years, if you’re self-employed
proof of the down payment and closing costs
information about your assets and investments
information about your debts or financial obligations
Proof of your down payment and closing costs will come in the form of financial statements from bank accounts and investments.
THINGS TO FIND OUT WHILE GOING THROUGH THE PROCESS
There are a number of questions to ask when going through the process to ensure that you are getting the best pre approval terms possible.
how long they guarantee the pre approved rate
if you will automatically get the lowest rate if interest rates go down while you’re pre approved
if the pre-approval can be extended