Getting Pre-Approved For A Mortgage
Posted On: 17.11.28
Getting Pre-Approved For A Mortgage
Getting a mortgage pre-approval is important when beginning your search for a cottage. With a pre-approval, you will know the maximum amount of a mortgage you qualify for, estimate your mortgage payments and lock in an interest rate for 60 to 120 days, depending on the lender. The pre-approval amount is the maximum you will get. The approved mortgage amount will depend on the value of your cottage and the amount of your down payment. When you are pre-approved for a mortgage, a lender has looked closely at your credit reports, your employment history and your income — and must then determine which loan programs you qualify for (including the maximum amount you can borrow and the interest rates you will be offered).
How pre-approval works
Getting a mortgage pre-approval means you’re preparing to take the next step in the cottage purchase process. The Royal Bank of Canada suggests these next steps
including working with a mortgage specialist to help guide you through the pre-approval process. Once you have selected one:
You and your mortgage specialist will discuss your financial strategy and needs, mortgage amount, down payment, purchase price, etc.
You'll learn about the various available mortgage options (fixed vs. variable rate, interest terms, payment options, amortization, etc.) and discuss which of them best suit your needs.
With your consent, your mortgage specialist will take an application, which will require you to provide details on such items as employment, income, assets, down payment (if applicable) and liabilities.
You'll give the lender permission to obtain a credit bureau report.
Your mortgage specialist will advise you about the documentation (income confirmation, down payment confirmation, etc.) you'll need to supply upon conditional approval of your mortgage. Any conditions must be met for your mortgage to be fully approved.
Pre-approvals are subject to your continued good credit and are usually good for 60, 90 or 120 days depending on the lender.
Why get pre-approved?
You'll save time house-hunting, seeing only homes you can afford (or in this case cottages).
You’ll have a better idea of your monthly payment amounts, as well as how much your down payment will be.
Real estate agents may serve you better because they know you're serious and ready to buy.
When you make an offer to purchase, the seller may be more likely to give it serious consideration because you have solid financial backing.
Your pre-approved status may give you more negotiating power with a seller.
Some lenders may give you a rate lock so you don’t have to worry about rising interest rates while you look for a new home.
There's no cost to you and you're not obligated to accept the mortgage.
Get your financial paperwork in order
You are under no obligation by getting pre-approved, but you want to be comfortable with the amount and terms of your pre-approved mortgage. That's why it's essential that you review all your personal expenses and have a good idea of your future expenses before you talk with a mortgage broker or lender about pre-approval.
* Source - http://www.rbcroyalbank.com/mortgages/getting-preapproved.html
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