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The Importance of Getting
Pre-Approved for a Mortgage
Before you start looking
at homes, you should figure out what you can afford by getting pre-approved
for a mortgage. Doing some calculations of your own may give you a rough
number but with so many factors involved it’s always best to get in touch
with a Mortgage Specialist like myself.
Keep in mind that being
“pre-qualified” and “pre-approved” are two very different things despite the
terms becoming interchangeable over time. Pre-qualifying for a mortgage
involves a quick review of your finances to estimate an approximate amount of
a mortgage that you may be able to qualify for. On the other hand being
pre-approved means actually applying for a mortgage with the approval subject
to the home qualifying as well.
Real estate agents and
sellers alike often prefer to work with buyers who have already been
pre-approved for a mortgage because it saves everyone a lot of time knowing
that you can afford the asking price. In multiple offer situations most
sellers will also accept an offer from a pre-approved buyer before
considering anyone else.
In order to get
pre-approved we will need to:
- Gather
Financial Information
Provide
as much financial information as you can including recent pay stubs, previous
tax returns, proof of assets and liabilities along with any debts you may
have. The more information I have the easier it will be to get you
pre-approved.
- Calculate
Your Total Debt Service (TDS)
Your
Total Debt Service is an accurate measure of your ability to pay your
mortgage by taking into account monthly obligations like car or credit card
payments and housing costs. A TDS of 40% or below would be ideal. If you
happen to be higher debt consolidation might give you some relief.
- Perform
a Credit Check
To
perform a credit check I’ll need your social insurance number along with your
spouse’s or any co-signer.
It’s
always a good idea to request a credit report beforehand in case there are
discrepancies. That way you have time to address problems before the process
even begins. You are entitled to a free credit report more than once a year
so long as it’s requested in writing and you choose to receive the printed
copy by mail.
Once we’ve gone over your
financial information, marital status etc. you will need to sign some
disclosures. At that point your mortgage application will be reviewed, signed
and submitted through the underwriting process. When approved Affinity Credit
Union will issue a pre-approval letter which outlines the terms of the
mortgage approval.
Congratulations! Now that you’re
pre-approved for your mortgage you can begin looking for your new home!
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