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Mortgage applications are time-consuming and require a lot of information to be collected and assessed before deciding whether to grant it or not. From application to signing the finalized paperwork can take weeks. Luckily, we have mortgage pre-approval to help speed the process for both lenders and borrowers. Pre-approval is an excellent tool for buyers to help make shopping for a home easier.

Defining Mortgage Pre-Approval

Mortgage pre-approval is a commitment from a mortgage provider to lend you up to a certain amount of money at a particular interest rate for a specified term. Mortgage pre-approvals are typically valid for between 30 and 130 days, giving you time to search for and make an offer on a home. It doesn't cost anything to get a pre-approval, and you are not held under any obligation to finalize your mortgage with that lender. Here are a few ways that obtaining a mortgage pre-approval can help make buying a home easier.

Get to Know Your Price Range

When you begin shopping for a home, you'll quickly find that prices vary widely by location and type of home. Knowing your price range means you can focus your efforts on the right areas and the right type of home. But you won't know your price range until you know how much a mortgage lender is willing to give you. Once approved, your mortgage pre-approval will tell you the maximum a mortgage provider is willing to lend and what the monthly payments would be. That's a starting point for you to budget, determine your down payment, and have peace of mind knowing you are shopping in the proper price range. 

Make Good Buying Decisions

The hot housing market is full of stories of houses selling for many thousands of dollars over the asking price. As a potential buyer, it is easy to get pulled into making emotional decisions about a home, especially when a bidding war breaks out. However, knowing your price range can help you make decisions based on facts, so you don't make offers you can't honour or spend more than you can afford. 

Make Lenders Compete for Your Business

You can get mortgage pre-approval from multiple lenders at the same time. This allows you to shop around for the best mortgage rates and terms and even leverage an offer from one lender to get a better deal from another. Lenders know they need to compete for your business and may be willing to offer lower interest rates or other perks to gain your business. 

Be a More Attractive Buyer

Having a mortgage pre-approval in hand can give you the confidence to make an offer without a financial condition attached. This can set you apart from other buyers who need to make their offer conditional on qualifying for a mortgage. It also signals that finalizing your mortgage when the time comes will be faster and easier than for someone without a pre-approval. 

What You Need to Get Pre-Approved for a Mortgage

While applying for pre-approval requires less information than a complete mortgage application, you still need to provide proof of your income and other assets. The lender may request proof of employment or bank statements showing regular payroll deposits. The lender will also do a credit check to look for a credit score over 600 in order to grant pre-approval. 

With Pre-Approval In Hand

It is important to remember that pre-approval is not a guarantee that you will qualify for your mortgage. It is simply a commitment by the lender to work with you to get approval up to a maximum amount at the interest rate offered. In the time between getting the pre-approval and finalizing your mortgage, you should avoid making any material changes to your financial situation. In doing so, you uphold your end of the commitment to having the income and assets to support the proposed mortgage payments. 

Just like all aspects of getting and managing a mortgage, a mortgage broker can help you secure a mortgage pre-approval. Call a mortgage broker to talk about your hopes for a new home, your goals for repayment, and get started on an application today!