How to get a mortage pre-approval? - Key Information
Buying a property is often one of the most significant financial decisions in one’s life. For many, this involves taking out a mortgage. But even before you start browsing real estate listings on Centris, it’s wise to consider a crucial aspect: mortgage pre-approval. This preliminary step is much more than just an administrative formality; it can make all the difference when presenting an Offer to Purchase.
In this article, our real estate brokers explain in detail what mortgage pre-approval is, why it’s essential, and how it can set you on the path to a successful property purchase.
What is Mortgage Pre-Approval?
Mortgage pre-approval, also known as pre-qualification, is an evaluation conducted by a mortgage lender to determine the amount they would be willing to lend you for purchasing a property. During this process, the lender will review your income, assets, debts, and credit score. This assessment helps determine your borrowing capacity and the maximum amount you can spend on purchasing a property.
How Can I Get Mortgage Pre-Approval?
Mortgage pre-approval can be obtained from lenders or mortgage brokers. Lenders include banks, credit unions, insurance companies, and loan companies. In most cases, banks act as lenders. Among these, you can find National Bank, BMO (Bank of Montreal), Desjardins, RBC Royal Bank, and others. These institutions lend you money directly and offer interest rates.
On the other hand, mortgage brokers have access to numerous lenders. They assist you in navigating the mortgage application process by advising you on the various types of loans available, comparing offers from multiple lenders, and helping you choose the one that best suits your financial situation.
If you desire a mortgage pre-approval, we can connect you with experienced mortgage brokers who can guide you through the process and help you find the best options based on your needs and financial situation.
Contact a real estate broker
What Information Should I Request When Obtaining Mortgage Pre-Approval?
It’s important to ask the right questions to your mortgage broker. For example, these questions could be: What is the validity period of the pre-approved rate? If interest rates decrease during the pre-approval period, will you automatically benefit from the lowest rate? Is it possible to extend the mortgage pre-approval if needed?
If you have other questions or points that seem unclear, don’t hesitate to discuss them with your mortgage broker. They are there to help you and address all your concerns
What Documents Are Required?
When applying for mortgage pre-approval, a lender or mortgage broker will review your income, debt-to-income ratio, and assets.
The documents required include:
-Confirmation of identity
-Confirmation of employment
-Confirmation of ability to finance the down payment and closing costs
-Information about your financial commitments or debts
-Details about other assets you own, such as a vehicle, secondary residence, or boat
Regarding confirmation of employment, your mortgage broker might ask for:
-Confirmation of your current income or pay rate
-Your current job title and how long you’ve held that position with your employer
-Notices of Assessment from the Canada Revenue Agency for the last two years if you are self-employed
To determine if you have the necessary down payment for your property purchase, your mortgage broker might request recent bank statements and investment statements.
For financial commitments or debts, you may need to provide your monthly payments for:
-Credit cards
-Support payments for spouses or children
-Car loans
-Lines of credit
-Any other debts
What Should I Do If My Mortgage Application Is Declined?
A lender may reject your mortgage loan application even if you’ve received pre-approval. Before approving the loan, the lender assesses whether the property you want to purchase meets certain standards, which vary from one lender to another. Each lender has its own criteria and lending policies. Adverse credit history can lead to loan rejection, among other reasons. If your application is rejected, discuss with your lender other possible options, such as a lower mortgage amount, a higher interest rate, a larger down payment, or the need for a co-signer.
Mortgage pre-approval is a crucial step in purchasing a property. It indicates the maximum amount you can borrow for a mortgage, but it doesn’t guarantee that you will actually obtain that amount. The approved amount will depend on the property value and your down payment. You may consider properties in a lower price range to avoid stretching your budget to the maximum. Remember that you will also need money for other expenses related to buying a property such as closing costs, moving expenses, notary fees, welcome tax, municipal taxes, etc. For more details on the expenses involved in buying a property, click here.
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Sources:
Buying a property: what are the costs for buyers?
https://yanicksarrazin.com/en/immobilier/buyer-information/buying-a-property-what-are-the-costs-for-buyers/
Mortgages: understanding them better for a real estate purchase
https://yanicksarrazin.com/en/immobilier/buyer-information/mortgages-understanding-them-better-for-a-real-estate-purchase-2/
The Promise to Purchase: understanding it better
https://yanicksarrazin.com/en/?p=24351
Our Montreal real estate brokers
https://yanicksarrazin.com/en/montreal-real-estate-broker/
Sellers and buyers: what are the costs to pay at the notary and the mandatory documents to provide?
https://yanicksarrazin.com/en/immobilier/seller-information/sellers-and-buyers-what-are-the-costs-to-pay-at-the-notary-and-the-mandatory-documents-to-provide/
National Bank
https://www.nbc.ca/
BMO
https://www.bmo.com/en-ca/main/personal/
Desjardins
https://www.desjardins.com/qc/en.html
RBC Royal Bank
https://www.rbcroyalbank.com/personal.html
How much do you need for a down payment?
https://yanicksarrazin.com/en/immobilier/real-estate-news/how-much-do-you-need-for-a-down-payment/
Buying a property: what are the costs for buyers? https://yanicksarrazin.com/en/immobilier/buyer-information/buying-a-property-what-are-the-costs-for-buyers/
