Pre-Approval

Purchasing a new home is one of the biggest decisions you will make in your lifetime, so it stands to reason that you would and should be prepared before you go looking for your next property. While not a formalized contract, the Preapproval step will help you to focus on houses that are within your price range and will help to narrow down the possibilities. For realtors and sellers, a preapproval indicates a serious buyer. It also helps to remove some of the uncertainty in buying a new home as it allows you to make an offer to purchase with confidence.

Setting Goals

When you first meet with a Mortgage Consultant to discuss mortgage financing, you should have a target mortgage amount and purchase price in mind. You should also be aware of how much your down payment will be. This information will help the consultant establish a starting point to the process. Please be aware that preapprovals may not be available for all home financing applications. A Mortgage Consultant can help you properly prepare for your property purchase.

Understanding Your Credit

Generally preapprovals will guarantee a mortgage rate for buyers from 90 to 120 days. This means that during this time, you must find, purchase and have possession and title in your name if you want to have the preapproval to be in effect and transferred to an actual approval for financing. The Consultant will also require an update and verification to the credit report and other details of your application file. It is therefore important, that once you begin your house buying process, that you do not make any significant financial changes to your personal circumstance as to not affect the preapproval. Any changes that may be different to the circumstances presented at the time of application may nullify the preapproval that is in place. If any part of your financial picture changes – for example credit, income, or asset related – you should immediately alert the Consultant of these changes so that your preapproval can be reissued and/or adjusted.

You should be aware that even though you have been preapproved, this is not a guarantee that you will automatically receive financing when you find a home. A mortgage preapproval is based on indicators such as credit history, income and down payment. A preapproval is based on the information at the time of application and does not include any information on the property being purchased and does not take into account the mortgage insurer approval (for mortgages greater than 80% financing) as mortgage insurers do not offer preapprovals.
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Understanding Interest Rates

Another potential hurdle regarding mortgage preapprovals is a fluctuation in interest rates, and the buyer’s financial picture since the time of initial mortgage approval decision. If interest rates increase substantially or the buyer’s income or down payment decreases unexpectedly, the basis for the mortgage preapproval will have changed and therefore the lender may choose to rescind the preapproval.

Helpful Tips

It is important to remember that even though you may have been preapproved for a mortgage, we do not recommend waiving the financing condition on a potential offer to purchase. The condition for financing provides a buyer with an exit if there are any issues with a lender who decides not to finance a mortgage. Although a mortgage preapproval indicates a lender has expressed a willingness to make a loan based on the applicant’s credit and income, the preapproval does not imply the lender will automatically accept the subject property.

  1. Keep your credit up to date
    • Pay bills on time
    • Reduce your debts
    • Limit credit inquiries
  2. Maintain steady employment
  3. Do not make any sudden financial changes to your current lifestyle
  4. Save cash for down payment and/or closing costs

Current Mortgage Rates

Term Rate
Prime Rate (P) 3.20%
Closed Variable P – 0.90%
Open Variable P + 0.80%
6 Month Closed 4.75%
1 Year Closed 2.94%
2 Year Closed 2.94%
3 Year Closed 2.99%
4 Year Closed 3.04%
5 Year Closed 2.99%
7 Year Closed 3.64%
10 Year Closed 4.04%
As of October 18, 2017. Rates subject to change without notice, OAC, E&OE