the property description on MLS or on a sales site by the owner and / or obtain an assessment or inspection of the property to establish its fair market value. If you buy a property, you may have to request access to the property from the sellers and you will have to pay the home appraisal or inspection fee, unless the lender pays them to induce you to do business with him home loan specialist
Before you start looking for a property, you should seriously consider applying for mortgage pre-approval to help you save time. A pre-approval determines the price of the house that you can afford depending on your financial situation. In this way, you have a clearer idea of the proper selling prices when doing your property searches. With pre-approval, you benefit from a mortgage rate lock-up, in the event that you foresee an imminent increase in the market.
What is a mortgage pre-approval?
A mortgage pre-approval is a process that allows you to access important information related to your real estate searches. When you get a pre-approval for a mortgage, you’ll know:
The maximum amount you can borrow
The amount of your monthly mortgage payments associated with the maximum loan
The rate of your first mortgage term
The mortgage pre-approval application is free and does not commit you to anything. However, when you get a pre-approval, the current rate is guaranteed for 30 to 160 days (depending on the lender). Thus, you protect yourself in case of rate increase. In addition, if interest rates fall during this time, your lender will give you the lowest rate.
Why use pre-approval?
Pre-approval of a home loan specialist helps you in a number of ways. It saves you time in your search because you only shop for houses in your price range. A pre-approval gives your real estate agent the signal that you are serious about your buying process. As a result, you will receive faster and more professional service. Finally, when the time comes to make an offer, pre-approval will reassure the seller of your financial capabilities. This will only benefit you in a competitive situation where several offers have been filed on the same property. Remember that if interest rates go down before you sign the mortgage agreement, the lender will have to offer you the lower rate,
How to get a pre-approval for a mortgage?
You will need to complete an application with a mortgage broker or financial institution. The creditor will need to verify certain information to ensure that you meet the membership criteria. In order to determine the maximum home loan specialist you qualify for, the lender will ask you for some important documents.
Your credit score indicates your financial health, and allows the lender to assess the risk by granting you a loan. If your credit score is between 680 and 900, you will be entitled to a mortgage loan with a quality creditor “A” (the chartered banks are “A” lenders).
If your credit rating is less than 680 and greater than 600, the creditor will consider other details to determine if you qualify with an “A” lender. If you are not eligible, you will need to do business with a “B” quality lender, such as Home Trust, to obtain mortgage pre-approval. Do a search on the internet to find a private lender.
If your credit rating is less than 600, you will qualify only from a “B” grade lender, and you will not necessarily get the best mortgage rates in effect.
The amount of home loan specialist for the purchase of your home. In Canada, the minimum down payment is 5% of the purchase price of the property. However, if you deposit less than 20%, you will need mortgage insurance to protect the creditor in the event of default.
The size of your down payment affects the loan amount. For example, if you want to buy a property worth $ 300,000, you will need at least $ 15,000 to make the minimum payment of 5%.
$ 300,000 x 5% = $ 15,000
- Your debt ratio
Your debt ratio is based on two calculations to determine the maximum level of your monthly mortgage payment. The calculation is based on your monthly income, expenses and other current debts. Lenders use the results to ensure that you can make monthly payments while still meeting your other financial obligations. So, if you have pre-approval, it means that there is a small risk that you will default on payment.
Depending on the broker or lender, documents related to your pre-approval request may vary. For example, some mortgage brokers require proof of income for pre-approval, while others only require it when finalizing the application.
Pre-approval of a mortgage does not mean that you should buy a house that is at the ceiling of your price range. The pre-approved amount represents only how much your lender is willing to offer you based on your financial profile, not how much you should spend. You can choose to buy a house that is priced below the maximum loan you are granted. In this way, you will be sure your budget will not be tight and you will be able to continue saving while paying off the debt.