In today’s world of rising home prices and increasing financing restrictions, buying a home may seem a distant dream to many. How will I save enough for a down-payment? Can I afford to buy a property at today’s current market values?
Take heart, buying a home isn’t as much of a financial burden as you may think. In many cases your monthly mortgage payment will match what you already pay in rent. Home loans are available through many banks and mortgage brokers. It’s a competitive business, so many institutions will offer competitive mortgage rates and can often match a low rate that you’ve secured elsewhere.
Once you’ve decided you’d like to purchase a home, the best bet is to get pre-approved as soon as possible. This helps you by holding an interest rate for up to 120 days and gives you a clear picture of your maximum affordability. Our advice is to get a mortgage pre-approval before you start looking at houses – there’s no point looking at properties that you won’t get qualified for.
With a pre-arranged mortgage, you’ll have a definite idea of how much you can borrow and what your monthly installments will be. When you make an offer on a house, you know you’ll be able to make the payments immediately. Sellers will also be more at ease with your offer, even if it contains a financing condition, if you’ve already been pre-approved. Getting mortgage pre-approval makes the transaction smoother for everyone involved.
It’s equally easy to start the pre-approval procedure. As you complete your mortgage application with your desired lender, they will ask your consent to do a credit check. You’ll also need to provide proof of your income, assets and liabilities in order for them to calculate your borrowing amount. Assuming that your pre-approval goes smoothly, they’ll give you a written certificate, guaranteeing a maximum loan amount against your name.
There are two pointers to be noted here. Firstly, insist on a written certificate from your lender. Many lenders run a cursory check and say you pre-qualify for a loan. This is not the same as pre-approval, and it carries no weight.
Secondly, the pre-approved certificate is proof of how much money the borrower can get. It does not bind the borrower to the lender who issued the certificate. Shoppers can change prospective lenders at any point of time. Our advice is to shop around. Your long term bank may be able to get you the best deal, but maybe not.
The length of time taken to get pre-approved depends largely on the borrower and the lender. The review must be detailed and cover all income and debt sources. In my experience, your bank or mortgage broker should be able to get you a pre-approval within 24-48 hours, provided you supplied all of the information they requested. Once the pre-approval’s in place, the fun begins – house shopping!
Would you like to know more about the process of getting pre-approved for a mortgage?
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