Looking for a home is exciting! It’s tempting to scour the MLS and find the home of your dreams. When you do, you want to see it
But wait . . .
Get Your Ducks in a Row
Have you saved up a down payment? Is your credit score in order? Do you know how much money you can afford to borrow?
Whether you plan to visit a bank or enlist the help of a mortgage broker, you should get in touch with a mortgage pro, before you start pounding the pavement. Follow these steps, before you start looking seriously for a new home:
- Start by pulling your credit score and reviewing your credit report yourself. We have two official consumer reporting agencies in Canada; Equifax and TransUnion. You can request your reports for free if you feel like waiting for snail mail, or receive them instantly for a fee. Newer online services, like Credit Karma and Borrowell, will give them out for free, if you are willing to sign up. Pulling your credit report yourself won’t hurt your credit.
- Make sure all of your information and accounts are correct. You might see areas that you can improve. If you’ve had credit issues, you can fix them, but it will take time. Now is the time to work on paying down debt, saving for a larger down payment, and increasing your credit score.
- Get Pre- Qualified
. Ifyou’re not ready to dive into a full mortgage loan application yet, you can do a simple pre-qualification. You’ll provide basic financial information to your mortgage professional and get a sense of what you might be able to afford. This is a huge benefit to you because you can start looking for properties in the correct price range. That way, you won’t be disappointed when you fall in love with a home that is above your means. Once you narrow down your choices, you’ll be ready for the next step of pre-approval.
- Get Pre-Approved. Once your credit file is in order, and you’ve narrowed your property search, talk to your mortgage agent about pre-approval. At this stage, your financial situation will be analyzed more stringently, you’ll provide documents that prove your employment and income and verify your assets and financial obligations. Then a full application will be sent to the lender who will confirm and evaluate your information. Hopefully, they’ll issue a pre-approval (subject to
approvalof the property), with the amount they are willing to lend, and an interest rate guaranteed for a certain amount of time, usually 30-90 days.
Following these steps may seem tedious but there are several benefits to getting pre-approved before you go looking for property:
- You will know whether you are able to borrow money
- You will know how much you can afford
- You will know what price range to look in
- You will have a good idea how much you will be paying each month (so you can think about whether updates or renovations will be possible)
- You won’t miss out because of delays with financing
Occasionally, a pre-approval doesn’t pan out. Maybe a borrower can’t provide the necessary documentation before closing, or an appraisal will value a house too low. While you can be refused even if you were pre-approved, chances of getting what you want are higher when you seek pre-approval first.
Got questions about mortgages or real estate transactions? I’d love to chat.
Give me a call or send me an email today. Don’t forget to consider the unexpected costs related to purchasing and moving, so you can budget accordingly. I can provide you with a check-list so you are not surprised at