You’ve managed to set aside some cash for a down payment and you’re ready to start looking at houses. If you are serious about buying a home in the next three months, it is time to talk to an expert. When you first started thinking of buying a home, you might have had some idea of what you wanted and where you wanted to live, but you probably had no real idea what kind of home you could afford. Mortgage pre-approval for your Calgary area home will help you clarify this.
Speak to a mortgage broker such as Mortgages By Candice, who specializes in the areas of Calgary and Okotoks, and get pre-approved.
Pre-Qualified or Pre-Approved?
When many homebuyers begin the home-buying process they confuse the pre-approval and pre-qualification processes – or assume they mean the same thing.
Pre-qualification gives potential homebuyers a general idea of what they could afford to spend on a home. It is often done over the phone and does not involve a credit application or income verification. When you meet with a mortgage broker and complete the pre-approval process, you will have a much clearer picture of what you can afford and much more.
A Calgary or Okotoks mortgage pre-approval shows you mean business. Home sellers and real estate agents will be more willing to show you homes if they know you have been pre-approved for the cost of the homes they are taking the time to show you. A pre-approval will also let you lock in an interest rate for several months while you shop for the right home. You won’t have to worry about rates going up while you make your decision. And if mortgage rates happen to decline, you still have an opportunity to get a better rate.
Starting the Process
Your mortgage broker will help you determine what you can afford to spend by looking at your credit history, employment record, bank information, previous property ownership, and any other factors that might apply to a large loan. When considering your income, your broker will help you calculate your Gross Debt Service and Total Debt Service ratios, which compare of your income and your expenses. As a general rule, your monthly housing costs—including your mortgage payment—should not exceed 35% of your gross monthly income. For a more detailed explanation of GDS and TDS, read What Lenders Like.
Your broker will likely ask you to provide this documentation:
- A photo ID
- Your social insurance number
- Your employment record for the last three years
- A pay stub or bank statement to verify your income
- Your address for the last three years
- Credit card statements
- Loan statements (car, student, lines of credit, etc.)
- If you currently own a home, you will need mortgage statements and an estimate of your home’s value. (Your broker will be able to assist you with this.)
- Housing expenses like taxes and utility bills
- Information about your down payment (For example, if it is a gift, you will need a letter from the giver specifying you are not expected to re-pay it.)
The Right Mortgage for You
As part of the pre-approval process, you and your broker will determine a mortgage type that works best for your current financial situation. With the variety of products available on the market today, choosing the right one for you can be challenging, and this is where the broker’s expertise is essential. They can help you determine whether you would be better off with a variable or adjustable rate, or if an open, closed, or convertible mortgage is your best choice. Each type has its advantages, and you can learn more here.
Finalizing the Process
For most people, the last steps of the mortgage pre-approval process for your potential Calgary or Okotoks home are smooth sailing. You will need to submit the MLS listing and photo and an offer to purchase the home you have decided upon. The lender will have an appraisal done to make sure you aren’t paying too much for the home. If your down payment is less than 20 per cent, the property will also need to meet guidelines for mortgage insurance from the CMHC or another provider.
Most people begin the home buying process when their lives are relatively stable, but occasionally, financial conditions change that can complicate pre-approval. If you acquired new debt since your initial application or your employment situation changed, your broker will work with your lender to determine if you still qualify.
Getting a mortgage pre-approval will start you down the path to owning a new home. Select a broker who knows the market and can help you meet your personal financial goals. Contact Mortgages By Candice of Calgary and Okotoks today and learn more about how we can guide you through the process.