Understanding the Importance of Mortgage Pre-Approval

When buying a home, obtaining a mortgage pre-approval is a crucial step.

Why Get a Mortgage Pre-Approval?

A mortgage pre-approval provides a clear understanding of the home price you can afford, helping you budget effectively and focus your home search.

This Blog Covers the Basics

In this blog, we'll cover the essential documents needed for a mortgage pre-approval in Canada, helping you kickstart your home-buying journey.

Benefits of Pre-Approval

Completing the pre-approval process reduces stress during the subject removal process and ensures all your paperwork is ready when needed.

Importance of Pre-Approval

Knowing your budget and financing options enhances the comfort of home ownership.

Stay Within Budget

Before falling in love with a potential home, get pre-approved to ensure you stay within your budget and focus on properties you can afford.

Discover Mortgage Products

The pre-approval meeting is an opportunity to learn about various mortgage products tailored to your needs. Lenders typically hold the interest rate for 120 days without obligation once pre-approved.

Speed Up the Process

Having income confirmation documents ready accelerates the pre-approval process, allowing you to start your home search sooner with confidence.

Steps to Get Pre-Approved

To get pre-approved for a mortgage, meet with a mortgage broker or lender and provide the following information and documents.

Required Documents for Mortgage Pre-Approval in Canada

• Personal Information: Government ID, age, occupation, marital status, children, etc.
• Financial Information: Bank accounts, balances, and details on remaining debts.
• Debt Information: Full details of debts, including credit cards, spousal or child support, car leases, student loans, and personal loans.
• Down Payment Source: Confirmation of down payment source and transaction history for the last 90 days. If the down payment is a gift, a gift letter may be required.
• Credit History Consent: Permission to run a credit history search.
• Current Property Information: Recent mortgage statement, homeowner insurance policy, property tax bill, legal description, and property value.
• Proof of Employment/Income Confirmation:
  • For salaried/hourly employment: Employer letter, proof of income (T4 slips, pay stubs, tax returns, NOAs for the last 2 years), and bank statement showing income deposit.
  • For self-employed/contract: NOAs for the last 2 years and Statement of Business Activities.
• Other Income Sources: Documentation for other income sources like part-time work, rental income, or pension.

Importance of Credit Score

A good credit score (680 or above) qualifies you for the best interest rates. If your score is between 600 and 680, lenders may work with you to qualify for an A-level lender. Improving your credit score involves paying bills on time, managing debt, and keeping credit card usage below 80% of the limit.

Checking Your Credit Score

You can check your credit score annually without affecting it at www.Equifax.ca.

After Receiving Pre-Approval

With a pre-approval, you'll have an interest rate hold for 90-120 days. Begin narrowing down your home search and contact a realtor. Remember, enlisting a realtor is a free service!

Accepted Offer Documents for Mortgage Approval

Even with pre-approval, lenders will review property-related documents to finalize your mortgage. Be prepared to provide:

• Purchase and Sale Agreement
• Additional property costs (heating, etc.)
• MLS Listing with property details
• Strata documents if applicable
• Potential bank appraisal if putting more than 20% down
• Contact information for your lawyer, builder, realtor, and seller if applicable

Working with a Realtor

Navigating the home buying and pre-approval process can be overwhelming. A realtor offers guidance from start to finish, helping you prepare, search for homes, and manage closing costs. For assistance, call or text us at 778-707-0020 or email info@arpitbajaj.ca.