Advantages of Pre-Approval

General Toni Tosti 16 Aug

 

Getting pre-approved can be a vital step to the home-buying process! But don’t confuse this with pre-qualification; you can get a pre-qualification through the My Mortgage Toolbox app to determine what you might qualify for. Pre-approval, on the other hand, means that a lender has stated (in writing) that you do qualify for a mortgage and what amount, based on your current income and credit history. A pre-approval usually specifies a term, interest rate and mortgage amount and is typically valid for a brief period of time, assuming various conditions are met.

In order to get pre-approved, you must submit and verify your financial history. I can walk you through this process and assist in finding you the best mortgage to suit your needs. Not only will getting pre-approved help speed up the process when you do find that perfect home, but it also helps determine the most accurate budget to fit your needs and the actual home price you can afford.

In fact, pre-approval can help you to determine three very important things:

  1. The maximum amount you can afford to spend
  2. The monthly mortgage payment associated with your purchase price range
  3. The mortgage rate for your first term

Not only does getting pre-approved make the search easier for you, but helps your real estate agent find the best home in your price range. Temptation will always be to start looking at the very top of your budget, but it is important to remember that there will be fees, such as mandatory closing costs, which can range from 1 to 4% of the purchase price. Factoring these into your maximum budget can help you narrow down a home that is entirely affordable and ensure future financial stability and security.

While getting pre-approved doesn’t commit you to a single lender, it does guarantee the rate offered to you will be locked in from 90 to 120 days which helps if interest rates rise while you are still shopping. If interest rates actually decrease, you would still be offered the lower rate.

Another benefit to pre-approval is that, when it comes time to purchase, pre-approval lets the seller know that securing financing should not be an issue. This is extremely important for competitive markets where lots of offers may be coming in.

Protecting Your Pre-Approval
Once you have gone to the trouble of getting pre-approved and determining the boundaries of your budget and mortgage payments, you will want to make sure that you take actions to protect the rate you have been offered.

To protect your pre-approval, there are a few things to keep in mind:

  1. Refrain from having additional credit reports pulled once you have been pre-approved
  2. Refrain from applying for new credit, closing off credit accounts or making large purchases until after the sale is complete
  3. Be prepared to show a paper-trail – any unusual deposits in your bank account may require explanation

Also, if your down payment comes from savings, the bank will want 90 days of statements to ensure the funds are accounted for.

New to Canada

General Toni Tosti 5 Aug

Canada has seen a surge of international migration over the last few years. With all these new faces in town wanting to plant roots in this great country, we wanted to touch base on some of the details surrounding mortgages and how new immigrants can qualify to be homeowners.

If you are already a Permanent Resident or have received confirmation of Permanent Resident Status, you are eligible for a typical mortgage with a 5% down payment – assuming you have good credit.

For Permanent Residents with limited credit, or individuals who have not yet qualified for Permanent Residency, there are still options! In fact, there are several ‘New to Canada’ mortgage programs through CMHC, Genworth Financial and Canada Guaranty Mortgage Insurance, which cater to this group of homebuyers.

To qualify for these New to Canada programs, you must have immigrated or relocated to Canada within the last 60 months and have had three months minimum full-time employment in Canada. Individuals seeking credit of 90.01-95% need to produce an international credit report (Equifax or Transunion) demonstrating a strong credit profile OR two alternative sources of credit demonstrating timely payments (no arrears) for the past 12 months. The alternative sources must include rental payment history and another altnernative, such as hydro/utilities, telephone, cable, cell phone or auto insurance. For individuals looking for 90% credit, a letter of reference from a recognized financial institution OR six (6) months of bank statements from a primary account will be required.

Utilizing a mortgage broker will help to ensure you understand your options and they can help determine the best program and mortgage choice for you. Before you talk with a mortgage broker, there are a few things you need to know when it comes to submitting an application – and getting approved – for your first mortgage in Canada:

1) Supporting Documents: If you’re new to the country but have a weak credit, supporting documents will come in handy. These may include proof of income, 12 months worth of rental payments or letter from landlord, documented savings, bank statements and/or letter of reference from recognized financial institution. These documents all paint the picture of whether you are a safe investment for a lender.

2) Build your Credit Rating: This is one of the most important aspects to getting a mortgage as credit rating determines your reliability as a borrower and will determine your down payment rate. One of the best ways to build your credit is by getting a credit card that you use and pay off each month. Paying other bills such as utilities, cell phones and rent can also contribute to your credit score and reliability.

3) Start Saving: One of the most expensive aspects of home ownership is the down payment; an upfront cost vital to securing your future. The down payment can either be 5% or 10% depending on your status. It is important to note that if you’re paying $500,000 or more for your home, the minimum down payment will be 5% for the first $500,000 and 10% of any amount over $500,000 – regardless of your residency status.

4) Choose a Mortgage Provider: Once you are ready to get your mortgage, you need to decide where you want to borrow from. There are three key lenders: Bank, Credit Unions and Monolines, as well as the option to purchase direct or go through a mortgage broker which may be able to offer you some extra savings.

Buying a house is an exciting step for anyone, but it is especially so for individuals who are new to the country. As daunting as it may seem, purchasing a home is completely possible with a little knowledge and preparation!