Everything you need to Know about Pre-Approved Mortgages

Are you planning to buy or invest in a property? As you go viewing and asking around for the price range of different property that appeals to you, it’s ideal to have a Pre-Approved Mortgage.

What is Pre-Approval?

It is where the lender goes through your finances and uses that information to determine the maximum amount that they can lend you and the interest rate to charge you. The Pre-Approval process can be daunting to many, but with the right documents, you are set to get started.

The process includes:

• Pre-qualification

  This stage is simply for gathering information on the state of your finances. You will need to look for a reliable and trusted mortgage specialist and discuss your finances. He or she will help you understand the options that are available to you.

• Pre-Approval

  At this point, you will need to present your potential lender with the relevant documents, e.g.

  • Identification, proof of employment,
  • If you are self-employed, you will need to provide the lender with Notices of Assessment,
  • Confirmation of the down payment,
  • Information on your assets and investments,
  • Show that you are employed,
  • Liabilities

  The fate of your case is in the hands of the potential lender. They will use the information you have provided to determine the maximum amount they can give and at what interest rate. If you are successful, you will receive a letter of pre-approval.

  However, you should keep in mind that this is a promise and not a guarantee.

• Approval

  If your application goes through, the lender will give you an approved mortgage amount that depends on the amount of down payment and the value of your home. Once you have the pre-approved mortgage, you can comfortably shop around for property that is in a lower price range.

  Benefits of Pre-Approval

  Having a pre-Approval is beneficial to you as a borrower, in that:

  • You will be able to estimate your mortgage payments
  • It gives you an idea of the amount of mortgage you qualify for
  • Depending on the lender, you could lock in an interest rate for 60 to 120 days
  • You will have realistic expectation of the price range of the property that you can afford to pay for
  • You will be more confident when you finally find the home of your desire

  As you wait for your application to be processed, refrain from acquiring new debt. It will change your financial position and status. Also, if you lose your job within this period, then, you will have to start the pre-approval process all over again.