“Should I get pre-approved for a mortgage?”
This is a common question that buyers often ask themselves, particularly if they are new to buying real estate in Toronto.
If you’ve been considering purchasing your first property or you are looking to make a move to a larger home, you may have wondered if you should get pre-approved for a mortgage. If you’re not familiar with lending terminology, you may even wonder what getting pre-approved for a mortgage means.
I’ve put together this blog post in order to help answer your questions so you can make the right decisions throughout your buying journey.
First, let’s discuss the difference between getting pre-qualified vs pre-approved by a lender.
What Does Getting Pre-qualified Mean?
The process of getting pre-qualified from a lender is typically a quick process that requires you to provide certain basic information such as your annual income as well as your debts and assets. Once you have provided this information, the lender will be able to provide you with an amount that they would be willing to lend you for the purchase of a home. However, it’s important to understand that the pre-qualified amount provided by the lender is not guaranteed, therefor, you should avoid submitting any offers until you complete the pre-approval process.
If you are simply curious to know how much your mortgage payments may be based on a certain purchase price and aren’t ready to go through the official pre-qualification and pre-approval processes, many of the major banks have online mortgage calculators that will provide you with an approximate figure. These calculators allow you to insert your purchase price, down payment amount, interest rate and amortization period in order to provide you with an approximate mortgage payment. I’ve included links below to most of major bank mortgage calculators below:
TD Canada Mortgage Payment Calculator
Scotiabank Mortgage Payment Calculator
CIBC Mortgage Payment Calculator
RBC Mortgage Payment Calculator
BMO Mortgage Payment Calculator
What Does Getting Pre-Approved Mean?
Getting pre-approved for a mortgage is the next step following the initial step of pre-qualifying and provides you with a more accurate figure than a pre-qualification figure. During the pre-approval process, you will provide supporting documentation relating to your income, debts and assets and will discuss your downpayment and financial limits and specific needs with your lender of choice. Additionally, you will also discuss the different mortgage options available to you such as variable rate mortgages and fixed rate mortgages along with the different terms, amortization period and payment options available. Once you are pre-approved, you will have a better understanding of how much you can afford when shopping for a home. It’s important to keep in mind that your pre-approval is typically valid for a certain period of time which is typically anywhere between 60-120 days.
Tip: Hold off on making any large purchases or applying for new credit such as credit cards or loans prior to getting pre-approved and prior to closing on your new home. Making large purchases such as purchasing a new car or applying for a new credit card will negatively affect the amount you will be approved for by your mortgage lender.
How Long Does It Take To Get Pre-Approved For A Mortgage?
Getting pre-approved for a mortgage can take as little as a couple of hours or as long as a week (sometimes longer) depending on whether you provide your lender with the required documentation and depending on your lenders requirements. Banks typically take longer than other lenders such as independent mortgage brokers due to their strict pre-approval requirements. If you’re in a rush to get pre-approved for a mortgage because you’ve found the home of your dreams, you may want to consider speaking with an independent mortgage broker as they may be able to get an approval faster.
Is There A Fee For Getting Pre-Approved For A Mortgage?
At the time of this blog post, most of major lenders and mortgage brokers do not charge a fee for completing the pre-approval process. However, it is wise to ask your lender if there are any fees associated with getting pre-qualified or pre-approved in order to avoid any surprises.
Hopefully the above information has answered all or most of the questions you may have had about getting pre-approved for a mortgage. If you still have unanswered questions, feel free to contact me or speak with a lender such as your bank or an independent mortgage broker.
Are you thinking about buying or selling or do you have questions about the current real estate market? Contact me any time with your questions. I’m always happy to help.