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Oct 5, 2020 | Mortgages | 0 comments

Calgary Mortgage Pre-Approval

Mortgages | 0 comments

Qualifying for a mortgage is a pretty big part of the home buying process. As a first time home buyer you will definitely have a lot of questions and concerns, from finding a licensed realtor to finding the perfect home and paying the monthly fees, can feel a little overwhelming.

What is a Mortgage Pre-approval?

A mortgage pre approval is a full review of your income and debts to figure out exactly what you will qualify for when you’re looking for a home. The best way to get a mortgage pre approval is to fill out an application and provide the required documentation to a mortgage broker or mortgage specialist at your bank.

Organizing your documents

The documents needed for the mortgage pre-approval are usually at your fingertips if you’re organized and have access to your online banking. Reach out to a mortgage broker as you start the process of getting organized, they will be able to let you know what you’ll need for your specific situation.

Here’s a list of possible documents you may need:

  • Proof of income, such as a letter of employment, paystubs, T4’s or your tax returns.

  • Proof of down payment, such a bank statements, investment statements or gift letters

  • Proof that you don’t have any payments in deferral because of covid 19 (you can’t obtain new lending with current loans are in deferral)

  • Information about any other properties you own or have co-signed for

mortgage approval
Getting approved is your first step to buying a home.

It is important to break it down and take it slow. Many first time home buyers think that the first step to buying a home is finding a realtor and heading out to look at homes. They miss the critical first step – the mortgage pre approval!

After you’ve been pre approved and you’re our shopping for a home, there are a few key things to avoid:

1. Avoid Major Purchases

Even if you are pre-approved, it is best to hold off major purchases. Your pre approval is based on your income and debt situation at the time of application. If you’re changing your debt load, you may not be pre approved for the same amount.

2. Avoid Changing Jobs

When lenders are evaluating your pre approval they are considering your income, your job tenure, your ability to maintain working the same hours in that role etc. If you change jobs during your house shopping period, you need to make sure your mortgage broker knows right away. The same lender may not approve of your new job and lack of job tenure. It’s better to buy the house and THEN change the job!

3. Avoid Applying For New Credit

Your debt servicing ratio is a crucial part of your mortgage pre approval, increasing loan amounts or applying for a credit card may have a significant change on your debt service ratio and may result in a declined mortgage application. It is best to stay away from applying for new credit or even co-signing another another loan when you’re house shopping.

There are 2 equations set by the Canadian Government are used by lenders to know how much a borrower can afford for a loan: Gross Debt Service Ratio and Total Debt Service Ratio.  Let’s break that down… 

Bottom line

Planning ahead of time will always help make sure that everything runs smoothly when you’re shopping for your home. A mortgage pre-approval is the perfect place to start. Reach out to your licenced mortgage broker for more information about what you need to do to get started.

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