We know that the home buying journey can feel overwhelming as you navigate your way through the maze of forms, financing, inspections, pricing, and negotiating. Today, we explore the advantages of getting your mortgage pre-approved, especially when buying a pre-sale home. Securing a pre-approved mortgage will allow you to act quickly once you do find the perfect home.

The first step is getting pre-approved

The best time to begin the mortgage pre-approval process is before you and your Realtor start to visit presentation centres and display homes. The pre-approval process allows you to start setting realistic expectations upfront about what you can and can’t afford.

According to Kevin Lutz, Regional Sales Manager (Mortgage Specialists) with Royal Bank of Canada, “A pre-approved mortgage puts incredible power in your hands. You'll know how much home you can afford and how much your monthly payments will be so you won't waste time looking at homes that are out of your reach”. He also re-enforces that “You are under no obligation to commit to a lender when getting pre-approved for a mortgage”.

Speed up the buying process

A mortgage lender will review your income, the source of your down payment, your assets and liabilities, and they will also inspect your credit reports to determine your credit worthiness. After examining these criteria, the lender will determine the maximum amount you qualify for, and supply you with a letter of mortgage pre-approval.With this letter you have a commitment, subject to conditions, that a bank is willing to loan you money. Having your pre-approval letter when you start looking for a home speeds up the process of making an offer as this is one less item you need to put in place before your offer can be finalized.

Secure yourself the best interest rate

It’s important to note that receiving a pre-approved mortgage doesn’t guarantee your mortgage application will be accepted on a specific property, however it does speed up the process and may guarantee you a rate on a fixed mortgage for a specified time period. For example, if you are buying pre-sale, MAC works with developers who have agreements with banks to be able to offer mortgage rate caps that will hold the interest rate for you for up to 24 to 36 months until your building completes. If rates fall, you’re still guaranteed the lowest rate available on a fixed mortgage during the guaranteed rate period. And, if interest rates go up prior to your completion, you will still be paying today’s lower interest rate.

SUMMARY

• The best mortgage lenders accurately measure your qualifications and how much house you can afford.
• A lender’s 90- to 120-day rate guarantee protects you if rates rocket up while you’re home hunting. When buying pre-sale, you may be able to secure a rate for  up to 24–36 months.
• A pre-approval is free and there’s no obligation to use the lender that pre-approved you.