You may have heard the term “pre-approval” mentioned when it comes to purchasing a home, especially your first home. Firstly, though, what is a mortgage pre-approval, and how can it affect your chances of purchasing your new home?
Here’s what you need to know!
Start off on the right foot
If you’re looking to buy your very first home, you probably have a budget in mind, but have you spoken with your bank or another mortgage lender?
A mortgage pre-approval helps you figure out just how much money a lender is willing to provide you with in order to purchase a home. This is crucial in helping you determine your budget, which then aids you in metring your expectations.
A pre-approval provides you with the following crucial information:
- The maximum amount you can spend on a home
- Your monthly mortgage payment (based on the maximum you can afford)
- Your mortgage interest rate (for the first term)
The whole process is quicker
Having a pre-approval for a mortgage, though unofficial, will help to get your offer accepted more quickly, since you’ll already be in your lender’s system. Much of the necessary information and qualifying will already be done, giving you the upper hand over buyers who may not be pre-approved.
Having a pre-approval tells the seller you’re a) serious about buying and b) you should have no problems getting financing.
Set those interest rates and forget them
When you obtain a mortgage pre-approval, the lender will almost always lock in interest rates for two to three months (60-90 days). This way, you have no need to worry about interest rates rising as you search for your home.
Get yourself a great rate (shop around!), lock it in for a time with a pre-approval, and then get searching for your home (in the correct price range!).
Plus, if interest rates go down during your house hunt, lenders will honour the lower rate. It’s a win/win situation.
What information is needed to get a mortgage pre-approval?
Along with basic personal information like your name, address, birth date, occupation, martial status, and dependents, you’ll need to provide your lender with the following:
- Bank accounts, branch information, balances, and debts
- Debt details: Credit card information, lines of credit, child or spousal support, student loans, personal loans, etc.
- The source of your down payment (often including a 90-day history of the account)
- Consent to run a credit history search, as well as a credit check (680 and above is considered a “good” score)
- Information on your current home (if you own property)
- Proof of employment, including a job letter stating you’re off probation if you recently started your position
If you have any questions about how a mortgage pre-approval can help you close on the purchase of a new home more quickly, feel free to call or text Gino Cipriano today (204-955-5853). He can put you in touch with a skilled mortgage broker who can help you with the entire process.