Looking to purchase your dream home in 2022? This can be an exciting yet stressful time – especially for first-time buyers. From finding a realtor, searching different neighbourhoods, engaging in bidding wars and of course, qualifying for a mortgage, it can feel like an uphill battle — but it doesn’t have to be.
To reduce some of that stress, we always recommend getting pre-approved for a mortgage. This not only simplifies the process but provides an overview of your buying power before you get started. So how long does it actually take to get pre-approved? Let’s dive a little deeper to find out.
What is a mortgage pre-approval?
A mortgage pre-approval is less formal than receiving an actual mortgage but still follows a similar process. Lenders will assess your financial situation to help you understand what a potential mortgage will look like and how much your estimated monthly payments would be. A pre-approval, however, does not assess the details around a specific piece of property. Instead, it gives you a general understanding of what kind of mortgage you’ll be eligible for and the size of down payment you’ll need — setting realistic expectations for what you can afford. A mortgage pre-approval gives you a clear understanding if you’re in a position to buy at all.
The Stress Test
As housing prices and record levels of debt have continued to increase over the last several years, the CMHC introduced the mortgage stress test as a measure for lenders to determine a buyer’s home affordability and their ability to remain stable in the face of unemployment and/or rising interest rates.
In order to qualify for a mortgage, all purchasers must undergo the stress test. Essentially, it measures a borrower’s ability to qualify for a mortgage based on comparing salary and/or income ratios with the greater of the five-year rate set by the Bank of Canada or the rate a buyer receives from a lender, plus 2%.
How long will it take to get pre-approved?
There are a few steps that you need to take before a mortgage pre-approval is finalized. First, you’ll want to find a mortgage company to work with. We encourage buyers to shop around different lenders, simply because the big banks may not necessarily offer the best rates. Fortunately, at Homewise, we’ve made the process quick and easy to shop around with our 5-minute online application. Once you’ve signed up, a dedicated Mortgage Advisor from our team will guide you through the process, answer any questions you have and help you filter through the best options from our 30+ bank and lender partners.
If you want to understand what your down payment will be prior to this, you can also use our affordability calculator to get a high level view of your maximum mortgage amount.
Once Homewise has received your full profile and key documentation including your photo ID, proof of employment, and credit score, we work to get your pre-approval within 24 to 72 hours.
And that’s it! Once you’re pre-approved, you’ll have a good idea of the type of home you’re able to purchase and the fun begins! You can start house hunting within your budget and feel confident in the offers you’re putting forward. Good luck!
Want to learn more about mortgage pre-approval? Check out this video from our Mortgage Academy series: Check out this video all about the pre-approval process.
