The Five Key Elements to Get Mortgage Pre-Approval
Are you worried about the mortgage pre-approval process, confused about mortgage guidelines, or feeling overwhelmed by the questions and documents needed?
We often receive calls that include these kinds of comments– “ I went to my bank for financing and it didn’t work out, I feel like I can afford the new house but the pre-approval is too low and the bank says I can only afford a condo, I have some issues on my credit, etc.”
Our team asks the right questions, focuses on what really matter to the home buyer, and were learn about the entire situation, the property, the client and their financial goals. With more knowledge and detail about our clients we can resolve any issues around credit, income, or down payment.
Getting ahead of a problem is the fastest way to solve a problem!
More and more Canadians are choosing to work with mortgage brokers every year. in 2017, 55% of first time home buyers obtained a mortgage through a mortgage broker.
Our neighbourhood bank branches are not what they used to be – there is an incredible amount of turnover in staff with many being inexperienced. Mortgage financing is a job for an expert. We have many lenders options and no bias towards one lender or another one. Our loyalty and focus is on the best fit for our client.
What are some the most important elements in a mortgage pre-approval?
From a lender’s perspective the more stable the income the better. Salary positions and guaranteed hourly are very strong sources of income. Part-time or casual hourly, commission, or overtime income can be used if there is a two-year history of consistency in this income. Consistency is the key! Along with the type of income and consistency lenders are also looking at the amount compared to the mortgage amount required. Is there enough income earned to support the mortgage payment, property taxes, utilities, and all other consumer debt payments?
The amount and source of down payment are important. Many home buyers use savings, RRSPs, investment accounts, gifted funds from family members. No matter is the funds are coming from the sale of a vehicle, an insurance settlement, a bonus, or from divorce agreement the lender must verify the source with documentation and be able to see that the funds remain available. If grandma plans to give her grandson $20,000 for a down payment she needs to be prepared to sign a gift letter detailing her gift of $20,000 to her grandson for the purchase of the specific home. Documents really does matter in the case of down payment.
Credit scores range from 450 to 900, the higher the score the better in the eyes of a lender. For the majority of lenders and to obtain best interest rates a score over 680 is preferable. The type of credit, history, and repayment details are very important. Any late or missed payments or collections are negative marks on credit scoring. A lack of credit or no credit is as much of an issues as poor credit. Every potential home buyer should have two pieces of credit – one credit card and a second piece of credit which can be – a student loan, line of credit, vehicle loan, even a second credit card.
Debt can be an issue when it comes to a mortgage pre-approval. Credit card debt is on the rise and many, many Canadians now have lines of credit – easy to use, and often hard to pay back. Vehicle loans have a large impact on mortgage pre-approvals. But the inverse isn’t true – vehicle loans are given out quite freely so it’s best to buy the home first and then the new car! Often high interest debt can be consolidated into a lower interest rate line of credit in order to get the pre-approval numbers in a safe range.
Mortgage pre-approvals are completed before finding that perfect property. So a few important pieces of information are missing – the location, condition of the home, home inspection, appraised value, zoning, square footage, number of acres, or any other unique element of the property! Lenders prefer highly marketable properties – location, square footage and condition are so important. Pre-approvals are a deep dive into the buyers personal financial situation, a live offer to purchase determines the property and ultimately if the lender will approve the mortgage based on both the buyer and the property.
Connect with us. We can make the road to home ownership much smoother!