When looking to buying a home in Brampton, Mississauga or the GTA, a pre-approval is often the first place to start. It helps determine one’s affordability of a potential mortgage and an idea of a price range in which to purchase a home.
A “Pre-approval” is essentially a determination of your purchasing power of a home based mainly on your income and down payment. In other words, if you are “Pre-approved”, then that would mean that you will likely be approved for the stated maximum mortgage because your income demonstrates the ability to afford payments on that sum. It is important to note that a Pre-approval is not an actual mortgage approval, as it only determines the borrower’s ability to afford payments on a principal amount of a mortgage and does not take into account all the necessary information that is needed to approve the mortgage itself. Mortgage pre-approval do not typically take into account credit, job tenure, property appraisal, etc., since these require more extensive review and may not be available at that time. The reality is that many lenders do not invest their resources into an actual approval until borrowers have an accepted offer to purchase a property.
If you are interested in learning more about pre-approvals in Brampton, Missisauga or surrounding areas…or if would like to ask us questions regarding a pre-approval, please fill out the form below or give us a call today:
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Q: What is a mortgage pre-approval?
A: A mortgage pre-approval is a preliminary assessment of your maximum purchasing power. It is typically a one-page letterhead that outlines affordability figures and a mortgage rate hold.
Q: How long are mortgage pre-approvals valid for?
A: A mortgage pre-approval is valid for up to 120 days. 120 days is the time limit of the rate being held for you. While the rate hold does mature after 120 days, you can have the mortgage pre-approval re-issued for an additional 120 days.
Q: Is a mortgage pre-approval a guarantee by the bank to give me the mortgage?
A: No, a mortgage pre-approval is not a guarantee. It serves the purpose of outlining affordability and the rate hold, but it does not guarantee that the bank will have to provide you the mortgage. During the stage of a mortgage pre-approval, two things do not happen that would otherwise happen during a live deal scenario:
- The mortgage default insurers do not review the deal
- Supporting documents are not reviewed in detail
Q: What can I use the mortgage pre-approval for?
A: You can use the mortgage pre-approval for a few things:
- To show your realtor that you have done your due diligence to get pre-qualified
- For your own assurance of knowing that you are buying within your purchasing power as assessed by the bank
- To secure a mortgage rate for 120 days and protect yourself from rate increases.
Q: What does a mortgage pre-approval cost?
A: Nothing. Nada. Zip. A mortgage pre-approval is free to obtain through our mortgage brokerage if it is being provided by a tier ‘A’ financial institution.