The house-hunting process is one of the most important things that most adult Canadians will do. There are many different aspects to the process that can play a big role in the house you land. One of the most important is the mortgage pre-approval, and it is an aspect that many Canadians underestimate.

A mortgage pre-approval makes the process easier. The mortgage pre-approval gives you a better understanding of how much home you can afford. More importantly, it gives you a tangible price range to work from, saving you time and effort during the house-hunting process.

With a mortgage pre-approval, buyers can be secure knowing that they have their rate locked in ahead of time. Moreover, it protects against a rate increase during the home search process.

What is a Mortgage Pre-Approval?

The mortgage pre-approval is a principal commitment from a mortgage lender. That lender will guarantee you a certain mortgage at a specified rate. That rate is generally locked in for a specified time period, typically based on the lender.

The great thing about a pre-approval is that it lets you know the maximum amount you can afford to spend on a home. Moreover, it lets you know the expected monthly mortgage payment will be with that max price and will tell you what the rate will be over the term of your mortgage.

Applying for a pre-approval is free. Even better, there is no commitment to the lender. It simply means that the lender has agreed, in writing, that they will approve you for the amount listed. More importantly, the rate the lender offers is good for somewhere between 90 and 160 days, depending on the lender.

That is the most important part. Getting your ideal rate locked in with a pre-approval protects you from any spikes in interest rates while looking for a home. If that weren’t enough, the lender would honour that lower interest rate if the interest rates decline during your search.

There is one caveat, however. The rates are guaranteed so long as your finances don’t substantially change by the time you apply for a home. Losing a job, for instance, would likely negate the pre-approval when the time to apply finally happens.

Why You Want to Get a Mortgage Pre-Approval

Locking in that rate isn’t the only good thing about getting a mortgage pre-approval. Getting pre-approved can help the buyer in several different ways.

The first is that it saves time during the home search. Too often, a buyer has looked at homes out of their price range simply because they didn’t know what they could afford. With a pre-approval, buyers know what they can afford. That means saving time by looking at the houses that fall within their price range.

A pre-approval is also a good indicator to a real estate agent that you are serious about buying a home. Without that pre-approval, they have no idea whether or not a sale will happen. The pre-approval gives them the indicator that you are actively looking and want to buy, giving you a faster, more targeted service.

Lastly, when the time comes to put in an offer on the home you have been looking for, a pre-approval will come in handy. It signals to the seller that financing won’t be an issue. In a situation where there are competitive offers, it can mean the difference between landing the home and moving on to the next one.

So, yes, it is great to get the interest rates that you have quotes for. But the fact of the matter is that a mortgage pre-approval has many benefits aside from the mortgage rate.

Mortgage Pre-Approval Tips to follow

While it isn’t exactly recreating the wheel to get a mortgage pre-approval, it is highly important in the homebuying process. A pre-approval is essential for numerous reasons. Knowing what you can spend saves time and money during the homebuying process. More importantly, you lock in your approved rate while you search.

That said, there are tips for getting a pre-approval that every Canadian should be aware of. They can save you time and trouble as you begin the quest for homeownership.

1. One of the Best Mortgage Pre-Approval Tips? Shop Around

No matter what you are attempting to buy – a TV, a car, or a home – shopping around is the best thing that you can do. When shopping for a home, there is a chance that you may see a few that feel like “the one.”

Even if you have that gut feeling, you can’t just expect to walk into a local bank and get the best possible deal. Only through researching and comparing mortgage rates (or using a mortgage broker) can you expect to get those rates.

A half percentage point may not seem like a huge deal. It can mean a huge difference in monthly payments and the amount of interest that you will pay over the life of the loan. Pull up that mortgage calculator one more time and adjust the interest rate by half a percentage point and note the difference.

By shopping around, you put yourself in a better position to understand what you may or may not qualify for. Getting those rates is important for one more reason. When you are approved at a specific rate, that rate is locked in for 90 to 160 days, depending on the lender.

When you have that interest rate locked in, you don’t have to worry about fluctuations in interest rates. Should rates go down, the lender will often honour the lower rate. It is the kind of protection that a buyer needs when shopping for a home.

2. Apply for a Pre-Approval Before Shopping for a Home

Many Canadians think that the initial step in buying a home is to call a realtor and get the ball rolling looking at homes. But that is definitely not the way to go about it. The very first thing to do in the house-hunting process is to apply for a mortgage pre-approval.

A pre-approval will help you act quickly when you finally do choose a home. If nothing else, that pre-approval removes a step in the process that can trip up some buyers.

More importantly, a pre-approval lets you know how much house you can afford. You can use a mortgage affordability calculator to get a decent idea beforehand, but that is a rough estimate. The pre-approval gives you the hard limit that you can spend on a home. It also gives you the confidence to know that a lender – not an arbitrary calculator – approved that amount.

One great thing about a mortgage pre-approval is that it can be done quickly if you have all of the required documentation ready. Call a local mortgage broker to get the process rolling and know what you can afford when buying a home.

3. Keep in Touch with Your Mortgage Broker

When utilizing a mortgage broker for the pre-approval process, stay reachable. Providing necessary documentation is fine, but they may have questions for you in any event.

If you are going through the pre-approval process, don’t go on any business trips or vacations without having phone or email access. Like it or not, accessibility matters. If they can’t get ahold of you, it can impact their assumptions about your intent and even lead to rejection.

If you have to leave town, let your broker know ahead of time. Communication can help save you a lot of hassle in the end.

4. Get Your Documentation Together

Being able to prove your financial standing is imperative in the mortgage pre-approval process. Simply put, it does not matter how much you make or what your credit score is if you can’t prove it. Collecting that information can take time, so getting started early and having your information together can cut down on that wait time.

When communicating with a mortgage broker, ask them what documents will be required to finalize the mortgage. Then, you can start getting those documents together. Here is a general idea of what will be required for not only the pre-approval process but the finalization of a mortgage as well:

• ID – you have to prove who you are (license or passport works)
• Proof of assets – if you own cars, boats, or another home/vacation home, you have to document that
• Financial statements – Any bank accounts or investments need to show that you can make the monthly payments
• Proof of income – A letter from your employer or pay stubs work. If you are self-employed, you will need a notice of assessment
• Debts – You also need to provide information about debts like car loans, student loans, and credit cards; trying to hide it will look bad in the eye of the lender since they have access to databases that have this information

Honesty is important. Lenders have access to this information if they want to go looking for it. Hiding anything will only reflect poorly on you and won’t help illustrate credit trustworthiness.

What Happens After Getting a Mortgage Pre-Approval?

After the lender looks over everything carefully, you will receive your pre-approval. Having that pre-approval lets you know what the maximum amount is that you can afford to borrow. It also shows you what mortgage rate that lenders will offer you.

With a pre-approval in hand, you can protect yourself from any potential interest rate increases for up to 160 days while shopping for a home. You can use that maximum mortgage amount as a guide during the house-hunting process. Knowing your maximum means avoiding homes that are out of your range, saving time and money in the end.

Contact SaskEquity Today

There are plenty of questions to be asked about Canada’s mortgage pre-approval process. If this guide leaves you with more questions than answers, that is okay. The first step is to reach out to SaskEquity.

Our team of mortgage professionals can help answer those questions promptly. A home is the largest purchase that most Canadians will make in their lifetime. It only makes sense to go into the process as knowledgeable and confident as can be.

SaskEquity helps make the process easier for you. When it comes to your mortgage, getting the best rates is imperative. Don’t let anything stand in the way of getting a mortgage pre-approval and finding the home of your dreams.