Obtaining a mortgage pre-approval is a crucial step in the home-buying process, as it provides clarity on your borrowing capacity and demonstrates to sellers that you’re a serious buyer. Follow the steps below to be ready to hit the ground running.
Understand Mortgage Pre-Approval
A mortgage pre-approval is a written commitment from a lender indicating the amount you’re eligible to borrow, based on your financial situation. It typically includes an interest rate hold for a specified period, often 90 to 120 days, which your lender can confirm, protecting you from any rate increases during your home search.
Gather Necessary Documentation
To apply for pre-approval, you’ll need to provide the following. Your mortgage advisor will also provide you with a list once you start the application process.
- Proof of Income: Recent pay stubs, tax returns, or a letter of employment
- Proof of Down Payment: Bank statements, including any investment account statements
- Credit History: The lender will conduct a credit check to assess your creditworthiness
- Identification: Government-issued ID, such as a driver’s license or passport
Apply for Pre-Approval
You can apply for pre-approval through various channels:
- Online: Many lenders offer online applications with immediate responses
- In-Person: Visit a local branch to discuss your options with a mortgage advisor
- Through a Mortgage Broker: Brokers can help you compare rates from multiple lenders and guide you through the process
Shop Around for the Best Rates
Interest rates and terms can vary between lenders. It’s advisable to compare offers to ensure you secure the most favourable deal.
Understand the Pre-Approval Validity Period
Pre-approvals are typically valid for 90 to 120 days. Confirm the timeline with your lender, as they can vary. If you don’t find a home within this timeframe, you’ll need to reapply. You typically have to close on the home in this period to get the rate, but can work with your lender once they know you are looking to lock in that rate or a better rate, depending on the market conditions.
Maintain Financial Stability
Avoid making significant financial changes during the pre-approval period, such as taking on new debt, such as financing a new vehicle, or changing employment, as these can affect your borrowing capacity.
By following these steps, you can navigate the mortgage pre-approval process in Ontario effectively, positioning yourself as a strong candidate in the competitive housing market.
If you have any questions or need any help, get in touch! I would love to help.