If you’re starting the home-buying process, a mortgage pre-approval can be a positive first step and set the foundation for a smooth journey. While it’s not mandatory, a pre-approval offers key benefits as it focuses your home search and establishes a clear path forward.
What is a mortgage pre-approval?
A mortgage pre-approval is a lender's initial approval of the loan amount you qualify for and secures a specific rate and mortgage product for up to 120 days. The pre-approval itself involves a comprehensive review of your financial situation to assess risk and your overall eligibility for a mortgage. It is also particularly beneficial for protecting you against potential interest rate increases.
By confirming how much money you qualify for, a pre-approval helps you define your home spending budget while enhancing your understanding of what you can afford. A pre-approval can also strengthen your position as a buyer and gives you an additional layer of credibility in the eyes of sellers if you ever find yourself in a bidding war.
Here’s a step-by-step guide to win the pre-approval process:
1. Choose a lender
Begin by choosing where to get your mortgage. You can either go directly to a financial institution like one of the big banks, a credit union or a monoline lender, or you can shop multiple banks and lenders all at once with a company like ours at Homewise. Most prospective buyers in Canada don’t shop around for a mortgage and this can cost them thousands of dollars down the line. Understanding the various mortgage options available can not only save you a lot of money in the short- and long-term, but it can help you make a more informed decision.
2. Gather your documents
To streamline the process from the get-go, gather the required documentation for the pre-approval process. Key documents include:
- Photo identification
- Proof of employment (recent pay stubs, tax documents)
- Credit information
- Notice of Assessment for the last two years if self-employed.
3. Apply for Pre-Approval
With your documents ready, apply for a pre-approval through your chosen lending institution. Homewise offers a convenient 5-minute online mortgage application, followed by personalized support from one of our dedicated Mortgage advisors. They will guide you through the process, answer any questions, and help you find the best options from our network of over 30 banks and lenders.
4. Finalize Your Budget
After your pre-approval, once you understand how much a lender is willing to loan you, refine your home spending budget further to include additional purchasing costs. This might include closing costs, a home inspection, home insurance (if your down payment is less than 20%), or home furnishing costs. Remember, a pre-approval is not a final approval, so it’s integral that you keep your budget, your finances, and debts in good standing until then.
Homewise’s approach to pre-approval is designed to be direct, fast, and free, providing prospective buyers with tailored guidance at every step of the process. Begin with our 5-minute online mortgage application and get connected with a dedicated Mortgage Advisor who will assist you toward achieving your homeownership goals.
