If you’re planning to buy property in Ottawa, you’ve probably heard mortgage and real estate experts, or friends recommend getting a mortgage pre-approval before you start.
It’s something I strongly recommended to my buyer clients, for many reasons.
With a pre-approval, a lender approves you for a specific mortgage and rate for up to 120 days, as long as your financial circumstances don’t change substantially before you make your offer.
A pre-approval lets you know how much you can borrow, which gives you a clear idea of your price range. When you want to make an offer, a pre-approval shows sellers you are serious and qualified to buy, helping you to stand out from any buyers who did not pre-qualify.
A pre-approval can also protect you if rates rise during your search.
You will be promised a particular mortgage and rate for up to 120 days. If rates go down during that time, you will get the lower rate. The lender will also ensure you budget and have funds ready for closing costs beyond the price of the home, such as lawyer fees.
When you are ready to begin searching, approach your bank or a mortgage broker to begin the process of your pre-approval. The application can usually be processed within a few business days.
The lender or broker will use information from your financial situation to determine how much you can receive and on what terms.
Some buyers prefer to deal with a mortgage broker rather than approaching only their own bank. There is no charge for a broker’s services, as their fees are paid by lenders.
A broker deals with multiple lenders, including banks and credit unions, and can sometimes find a better mortgage and rate for your circumstances than what your bank might offer. If you want your own bank included for comparison purposes, look for a broker who lists your bank among the lenders they work with.
Among the things the lender will require for the process:
- Photo identification, such as a driver’s licence or passport
- Bank Account statements
- A letter from your employer confirming your position, years of service and salary
- Full information on debt, such as credit cards and car loans
- The total and source of your down payment, with confirmation of where you are getting it. If a parent or relative is providing the down payment as a gift, lenders require a letter confirming this and that you are not expected to replay this gift.
- Permission to run a credit history check
- T4 Slips
- Recent Assessment Notices from Revenue Canada following the filing of your income tax
- Copies of your most recent paystubs
- If you have other sources of income, proof of these sources
The lender will use this information to determine which mortgage and rates you can receive.
Once you receive your pre-approval, remember that it is still conditional. It’s important not to make major changes in finances, such as changing your job or getting a large loan while searching for your home, or you could be denied final approval when you want to make an offer.
Pre-approval also does not guarantee the lender will approve every property you might want to buy. The lender will want to assess the property you are purchasing and possibly request an appraisal to ensure the price you are offering is not above current market value.
If you’re planning to buy or sell property in the near future, I’d be happy to tell you more about the current market. With more than 30 years of experience assisting buyers and sellers in Ottawa, I know the city and its neighborhoods well and I have negotiation experience in a wide range of market conditions. I can also recommend mortgage brokers who have assisted my clients in the pre-approval process.
You can read more about me and my services at www.nancybenson.com. Feel free to give me a call, at 613-747-4747.