It is important to know the difference between an approval and a pre-approval for a mortgage. A pre-approval is based on estimates using theoretical figures for a property. An approval is for a specific property once an offer is made and is backed up with documentation to prove the information in the application.
I am a firm believer that everyone should get a mortgage pre-approval. Without it, you don’t know what you can afford. It’s a great idea to get pre-approved sooner rather than later. If you are thinking about getting pre-approved, do yourself a favour and set up a quick call or appointment with a mortgage broker.
It takes less than an hour to complete.
You want to be able to make an offer with confidence. Nothing is worse than getting ready to buy a home only to find out that there are issues that may take a year or two to resolve. A common problem I see is that clients do not have enough established credit, which can take up to two years to build with a trade line.
Be honest with your broker and tell them all the facts of your financial situation. Unlike a mortgage specialist at the bank, a broker is here to work on your behalf and with your best interests in mind—not the lender’s. They will help ensure that everything is in order so that you can get approved.
How long does a mortgage pre-approval last?
A pre-approval is also a great tool if you are looking to purchase a home in the next 120 days. Your broker can obtain a rate hold through a lender. A rate hold will lock in a rate today, so if the rates go up in the market, you’re still entitled to that lower rate as long as the closing date is within that 120-day window.
If rates go down, you can obtain the new lower rate. Make sure your broker is aware you would like one so they can book it for you.
Common pre-approval issues
Clients often do not have enough established credit, which can take up to two years to build with a trade line. With that being said, be honest with your broker as they can still help you get a mortgage with a bad credit score or with a lack of established credit.
A broker works on your behalf and keeps your best interests in mind when finding lenders for you.