If you badly want to get a mortgage, then pre-approval is a key step. Once you have a mortgage pre-approval, your income, debts, assets, and credit will be reviewed by a lender. Whatever the result of the assessment, it will be the basis of whether or not you’re pre-approved. Likewise, it helps determine the mortgage size you can receive.
Having a pre-approval letter will give you the advantage among others who are also applying for a mortgage since you already have a lender on board. So, here are the steps on how to get pre-approved:
- Make a plan
If you plan to buy a house, make sure to create a plan. Know how much you can afford to pay for a loan each month before any recommendation is made by the lender.
- 2. Get your free credit score
The higher your credit score is, the more you are qualified for better rates. So, know where you stand before looking for a lender. Get your free credit score to see whether or not you qualify.
- Check your credit history
Ask for copies of your credit reports and dispute any mistakes. If you see fraudulent accounts, meet with creditors to settle the problem before proceeding to your application.
- Calculate your debt-to-income ratio
Calculating your debt-to-income ratio (DTI) lets you know whether you exceed the required DTI. Lenders usually choose those borrowers with no more than 36% DTI. The debt-to-income ratio is significant as it helps lenders assess whether you are financially capable of handling a new debt.
- Collect your documents
You will need to collect your documents such as your income, financial account, and personal information during pre-approval. Lenders will check the data to see whether you qualify or not. Here are the documents you will need:
- W-2 forms from your employer for the last two years
- Current pay stubs
- Federal income tax returns for the last two years
- Bank statements for the last two months
- Identification like your driver’s license
- Research different lenders
Research different lenders if you want to find a lender whom you can trust during the whole duration of your mortgage term. Communicate with the lender and talk about the loan closing timeline. Also, ask questions that you’re curious about before finally working with the lender.
- Apply for pre–approval and compare offers
Apply for pre-approval once you have used your pre-qualifications to narrow your choices down. Compare the lenders’ offers to get the best fees and rates.
Mortgage Approval & Pre-approval
Having a mortgage can be one of the most frustrating aspects of purchasing a house. So it’s important to understand the measures taken to get a home loan, and the main words used by lenders. Mortgage pre-approval and approval are two separate phases, basically at the opposite end of the process. Here are the differences between the two:
Pre-approval is a way for the lender to say that they would want to work with you. When you apply for pre-approval, it is a thorough process. The lender will review your credit as well as the history of your employment, income, and other assets. In other words, the pre-approval process is a mortgage application, except that in the application, there is no particular home attached to it.
After the lender has checked your credit and other personal details, the bank will inform you about the amount you can borrow. You may look for several lenders for your pre-approval and select the best deal.
The approval takes place after you have selected your dream home and sent it to the bank for deliberation. The approval will be subject to an appraisal and inspection of the property. If all meet the lender’s satisfaction, they will go proceed and finalize your loan for the house. Being pre-approved by the lender would mean that the process for final approval would be much quicker because your financial statements have already been submitted and reviewed.
Difference between Mortgage Approval and Pre-Approval
Getting pre-approved doesn’t automatically mean you’re going to get the final approval. A pre-approval typically lasts for a fixed period of time — usually 60 days. At this point, the bank’s pre-approval will expire unless you renew it, and you have to start again the process.
If the property value is too low, the bank will not authorize the loan, even though you are pre-approved. However, if your financial situations change between pre-approval and approval, the bank may choose not to give you a loan.
Where to look for the best mortgage lenders in Canada?
If you are looking for the best mortgage lenders in Canada, then choose Private Mortgage Canada now. We are more than willing to assist you with your mortgage-related concerns. We have helped thousands of homeowners and we want to do the same with you.
Consult with us and get approved in the shortest time possible. We have specialist brokers to take care of all your issues. Just set an appointment with us at your most convenient time so that we can work on your application immediately. You may send us an email at [email protected] or contact us through our contact number at +1 416-825-0142.