As a first-time home buyer, you'll probably need to borrow most of the price of the home. That's why getting pre-approved for a mortgage is a smart thing to do — even before you start your home search.
Most people believe that once you’re pre-approved, you’re good to go, this is far from the truth. A pre-approval simply means that based on your CURRENT income, expenses, down payment and credit you SHOULD be able to get fully approved once you find the right property.
Once you find the right home, you'll need to act quickly and
while, it doesn't guarantee your mortgage application will be
accepted. Getting pre-approved is smart for these reasons:
1. You can make a quick, confident offer on your perfect home
2. Get the home you can afford, knowing exactly how much you can borrow and what your mortgage payments will be
3. You can protect yourself from rising interest rates with a fixed interest rate mortgage. The rate's guaranteed for the up to 120-day pre-approval period
4. Set your budget knowing that the term, amortization, and mortgage payments are locked in at the time of approval
The second part of the equation is the property. Keep in mind even though you’ve been pre approved the lender must now approve the property you’ve selected. Many times the Banks don’t even pull a credit bureau, they base their pre approval on calculators based on information you’ve provided, they have no idea what your credit is or what type of property you’re going to buy.
A pre approval is strictly a means for you to confidently go out and source out the best home within your budget. Lenders must now approve the home you’ve selected as well.
When buying a home always request two clauses to be added to the offer. One “subject to finance” and two “subject to insurance”. If the property was built back in the days prior to 1950 it may have old electrical wiring or Knob and Tube wiring consisting of 60 AMP Service…Most insurance companies will only insure 100 AMP service.
Buy adding those two clauses in your agreement, you then have a way out and can look for another property with no issue at all. If you don’t have a “subject to financing” or “subject to insurance” clause at all and you’ve already given your deposit to the realtor (because you were under the impression that you were going to be approved), then you’re out of luck and will be stressed out and scrambling to find a lender that will help you out, even though you were technically “pre-approved”.
Better yet, contact our office and let’s provide you with a proper pre-approval and have you fully prepared for what most likely will be the largest purchase in your life!
Dominion Lending Centres
Service First Mortgages