When purchasing a new construction home from a builder, one of the first and most important steps to consider is to get pre-approved for a mortgage. A mortgage pre-approval is the process in which a mortgage broker reviews your application to determine how much money the banks are willing to lend you. Doing this before committing to a new construction purchase ensures you’re purchasing with your affordability. Also, it’s very typical that within 30 days of signing a purchase agreement, a mortgage pre-approval will need to be provided as part of their ‘buyer checklist’.
Mortgage pre-approvals are beneficial to home buyers in many ways. First, they determine how much you can afford to spend on a home, narrowing your search and saving you time. Second, they give you a better chance of having your offer accepted by a builder or seller because you can prove that you are a qualified buyer. Having a mortgage pre-approval ready can give you an advantage in a situation where there are multiple buyers lined up to purchase the same property. Another huge benefit is being able to secure a rate, sometimes for as long as 1 year. This protects you again possible rate hikes.
To get pre-approved for a mortgage, you’ll need to provide your mortgage broker with some basic information about your income, down payment, assets, and debt. We’ll also run a credit check to determine your credit score and evaluate your overall financial health. Based on this information, we’ll provide you with a mortgage pre-approval letter stating how much money the banks are willing to lend you.
It’s important to note that mortgage pre-approvals are not guaranteed (by the mortgage broker or the ban) that you will be approved for a mortgage loan at the time of closing. The lender will still need to review additional documentation and information before finalizing your loan at the time of closing. Since much can change (credit, income, debt loan, etc.) files will need to be adjudicated on an as-needed basis. Additionally, pre-approvals typically expire after a certain period (4 months, 1 year, etc.), so it’s important to start your home search soon after receiving one. With pre-approvals that are drafted to buy a new construction home, a mortgage health check should be done periodically.
In conclusion, getting pre-approved for a mortgage is an important step for any home buyer. It will save you time, give you assurance which will bring confidence in your search, and give you an advantage in a competitive housing market which is still very much the case in Canada. If you’re thinking about buying a home (either resale or through a builder), consider getting pre-approved for a mortgage as soon as possible to help streamline your search and increase your chances of success.
Call us to get pre-approved today. (905) 455-5005