Mortgages in Canada: How Does the Mortgage Approval Process Work?
The mortgage approval process can be very straightforward if you know what to expect. In this post, we’ll go through what a mortgage approval is and what you can do to prepare. Once this process is complete, you’ll be that much closer to finding the home of your dreams!
What’s the difference between a mortgage approval and a pre-approval?
A mortgage pre-approval is when a lender assesses your finances and evaluates what you can afford for a down payment. They then pre-approve you for that amount depending on the evaluation. Your official mortgage approval would be based on those rates.
What is the difference between pre-approval and pre-qualification?
A pre-approval means you have been approved for a certain mortgage amount after a lender has gone through your finances, credit score, and a few other things. A pre-qualification, on the other hand, is more of a conversation with a lender to see if you’re eligible for a mortgage and how much you might be able to qualify for. A pre-approval gives you an exact amount a locked-in interest rate.
When is the right time to get a pre-approval?
Keep an eye on Edmonton’s interest rates and shop around for the best lender. This will help you determine the optimal time to get a pre-approval and with which institution. While this will take some research, you’ll congratulate your efforts when you lock in that super low-interest rate.
What do you need to get your mortgage pre-approved?
- At least two years of personal tax returns and financial statements
- Photo ID
- Record of employment income
- A letter from your employer stating your current salary
- Account numbers as well as the location of your bank accounts and investments
- Proof of assets
How much will you be approved for?
This amount is dependent on a couple of factors including your credit score, income, and gross debt ratio. This number can also be figured out beforehand by using a mortgage rate affordability calculator – although this does not guarantee what you’ll be approved for. The lender you choose will do a more in-depth analysis of your finances to give you a more accurate estimate.
Finalizing Your Mortgage Approval
In order to finalize your pre-approval, you’re going to want to keep your finances at a stable level. The lender will also want to make sure they’re giving you the correct amount for your mortgage loan. This means they’ll make any changes if need be, and then they’ll finalize your approval.
A Few More Things…
Here a few more things to consider to help you decide if a pre-approval is right for you:
- Renewal of pre-approval is a simple process that doesn’t take very long, so don’t worry if you don’t find your dream home within an estimated amount of time.
- The processing time is quicker because you’ve already filled out the paperwork.
- There is no guarantee the loan amount you are pre-approved for won’t need to be re-evaluated.
- You have to get an appraisal of your new home – but they aren’t done at the pre-approval stage. For this reason, make sure you do your appraisal before you make an offer. This will prevent you from overpaying and risking the lender nullifying the pre-approval.
Now that you know more about the mortgage pre-approval process, you’ll be able to seek out great lenders with confidence. Remember to do your research, and you’ll find yourself in a great home (with a great interest rate) in no time!