02 Jun Why preapprovals are critical for first time buyers
If you’re thinking about buying your first home it’s essential to have a real understanding of what you can afford based on your financial situation as well as your lifestyle. The best way to go about making that determination is to consult with a mortgage broker to go over your individual financial profile. Another benefit of consulting with a mortgage broker ahead of time is to obtain a mortgage preapproval.
What is a mortgage preapproval?
A mortgage pre-approval occurs when a lender, usually a big bank, provides a buyer with a written statement confirming they qualify for a mortgage loan of a specific amount based on their current income and credit history. A pre-approval usually specifies a term, interest rate and mortgage amount.
How does the process work?
You will be required to provide some basic information about your financial picture, including proof of employment and income, as well as previous years’ tax summaries. Your mortgage broker will then use a specialized process to determine how large of a mortgage you are eligible for, as well as details about the rate and term.
Should my mortgage preapproval dictate my budget?
The short answer is no. When a bank qualifies you they don’t take monthly expenses or your lifestyle into account. That’s why when rates are low, like now, sometimes people qualify for larger mortgages than they can realistically afford. That’s why working with a licenced mortgage professional is important to help buyers decide not just what type of mortgage is right for their individual situation, but also to determine how much house they can afford considering their lifestyle and priorities; it’s never just about the rate.
Will my rate be guaranteed?
Yes. When you receive your preapproval your rate will be guaranteed for a specific amount of time as indicated in your preapproval letter, usually 60 to 120 days. Having a low rate locked in can end up saving buyers thousands over the long run.
Why is having a preapproval so important?
Having a preapproval helps ensure that you don’t waste your time shopping for homes outside of your price range. It also lets sellers know that you’re a serious buyer and that financing won’t be an issue. A letter of preapproval is especially important for first time buyers because their age and financial status are often a point of concern to sellers. The preapproval enables buyers to shop with confidence, and puts sellers at ease when receiving an offer.
In Montreal, where supply is low and bidding wars are common, having preapproval can sometimes be the difference maker in enabling buyers to move quickly on a property they want.
How can Orbis help?
Orbis Mortgage Group provides clients with access to the full spectrum of lending institutions across Canada including big banks, credit unions, trust companies and private lenders. Our licensed team of mortgage professionals is there to assist clients with their financing needs and provide expert advice throughout the mortgage process, including for preapprovals.