The weather is finally turning for the better, certain restrictions are being lifted (depending on the area you live in) & our team is getting flooded with questions surrounding pre-approvals.
Its natural this time of year for mortgage inquiries to increase and with everyone being isolated & there is a lot of intrigue to get back to some form of new normalization and that includes getting prepared to buy real estate.
This is a great opportunity to get refreshed on the importance of mortgage pre-approvals.
We are always a big advocate for mortgage pre-approvals, but in light COVID-19 & an ever change in underwriting policies and procedures its a MUST.
Mortgage Pre-Approvals serve many purposes:
-Provide you with peace of mind - you fully understand what you qualify for, what restrictions or restraints you should put in place for your purchase and a general understanding of your cash flow prior to buying and post purchasing real estate.
-Sellers now more than ever expecting buyers to be pre-approved and are in light of COVID-19 asking for evidence to allow access to their home.
-Lock in an interest rate so that you are not impacted by any sudden increases (interest rate protection)
-Help speed up the underwriting process when a purchase is made, with most documentation being collected up front.
-Increase bargaining and negotiating power
-Allow for faster closing period if necessary
-Understand your borrowing capacity
-Plan your monthly payment and home ownership expenses
-Simplify property search/narrow your focus
-More creditability as borrower
Tip: Pre-Qualification vs Pre-Approval
A mortgage pre-qualification can be useful as an estimate or guide in terms of how much they can afford to spend on a home. An example of a pre-qualification is using our Free Mortgage App/Calculator: https://www.dlcapp.ca/app/scott-westlake Our app can quickly and fairly accurately capture information to provide you with a guide to buy a home. However a pre-qualification is not a pre-approval.
A Pre-Approval is much more valuable. A pre-approval should be done by a professional that is robust in nature and fully underwrites the client to ensure they can afford and qualify to buy a home. A very important aspect is permission to pull credit and evaluate credit. Most pre-qualifications do not capture credit be it SCORE or DEBT and leave it up to the consumer to provide their assumption of their credit. A pre-approval should also capture income and collect the necessary documentation and review it along with down payment. Credit, income, down payment are often taken at face value and not collected which a mortgage professional will request and evaluate provide a pre approval.
To Conclude:
In short, it should be noted that not all pre-approvals are created equal. Work with professionals you trust and have strong reviews or have been recommended by a trusted party. Pre-Approvals are not the same as Pre-Qualifications and you NEED a pre-approval to buy. Appraisals are part of the missing link with pre-approvals and may be required, meaning a pre-approval doesn't remove the need for a financing condition as the property also has to be assessed. For more information on how to get pre approved or to obtain our free home buying guide email scott@thewestlaketeam.com