“By failing to prepare, you are preparing to fail”.
Benjamin Franklin
Today, this quote could certainly provide guidance to home buyers when it comes to the importance of getting pre-approved for mortgage financing before they start looking for their dream home.
Gathering relevant information... credit reports!
One of the most important and often underestimated components in any mortgage pre-approval process is the gathering of information found on the potential home buyer’s credit report.
It is not unusual for credit reports to contain inaccurate information that can negatively affect your credit score. This can result in paying higher interest rates or being turned down for financing all together. If incorrect information is found on your credit report, steps can be taken to have the incorrect information removed but this process can take months and if left too late can cause you to have to walk away from your dream home.
Of course your credit score will also give your mortgage broker information that they will use to place your mortgage application with a suitable lender. This can prove to be challenging with applicants whose credit scores may not qualify them for traditional mortgage products offered by the traditional “A” lenders. In these cases, a Broker may need time to shop around for a mortgage lender with more flexible guidelines.
Working with Realtors...gaining a competitive edge!
More and more realtors are asking potential clients to have a pre-approved mortgage in place before they help them search for a home. This is because without access to critical information that is drawn out by the pre-approval process Realtors and clients are often working blind. Credit history, income and employment verification, and home affordability are all important components the Realtor will want to make sure are not going to be issues when it comes time to purchase the home.
With this information in place, Realtors can also focus on showing prospective clients houses that are in their price range. Realtors also know that having pre-approved mortgage financing in place can also provide them with increased bargaining and negotiating power, providing them with a competitive edge over other Realtors. In situations where multiple offers are being entertained by a prospective seller, a seller might be more likely to immediately accept an offer with pre-approved financing in place over an offer conditional on financing even if that offer is a bit lower, because you are giving the seller peace of mind that their home is sold.
Getting past the price point...focusing on the little things!
As mentioned above, if you apply for a pre-approved mortgage before starting your new home search, you will know what is in your price range and you can focus on homes that are affordable and fit your budget.
Getting past the price point can also allow you to turn your attention and focus to all of the little nuances each home has to offer. Many home buyers devote so much of their time and energy comparing house prices that they often lose sight of the distinct or personal home features that may be important to them and may distinguish one house from another.
Protection against rising interest rates... why pay more if you don’t have to!
Of course a pre-approval also provides the home buyer protection against rising interest rates. With a pre-approval, most lenders will offer an interest rate hold for 90-120 days while you search for a house to buy. This can be an attractive feature in times of rising interest rates.
Getting the deal closed faster...the end game!
Once a mortgage pre-approval commitment letter is issued by any lending institution it will outline the terms and conditions that must be met before closing. At this point your Mortgage Broker will work with you to start collecting all the necessary documentation required before closing.
Employment letters, pay subs, suitable forms of identification, down payment documentation and verification and gathering solicitor contact information are just some of the documents or components that a broker will start to ensure gets collected and submitted in a timely and organized fashion.
Once you find the home you would like to purchase, the application is updated with the property details and it is sent in for final approval. With the pre-approval information already in place this can cut down the final approval process by weeks. This can be of prime importance in situations where a quick close is needed.
Getting a pre-approved mortgage is not only a sensible approach when starting your search for your dream home, but as you can see it also provides the home buyer with many practical advantages.
If you have any questions regarding this article or if you would like to explore your mortgage financing options in confidence, please call 416.303.4480
Domenic Mirabelli
Mortgage Agent
Lic #M10000364
416.303.4480
"Helping you find a mortgage and peace of mind"
Great informative article! Getting a pre-approved mortgage is definitely a win-win situation for everyone involved in the transaction.
ReplyDeleteStewart Chow
Real Estate broker