Many of our clients that are considering a purchase of a residence in the near future find it beneficial to discuss the various mortgage options available to them and to obtain a pre-approval beforehand. Whether they are first-time homebuyers needing lots of information and advice, or are savvy, more experienced homebuyers just needing the comfort of knowing what their mortgage limitations are, a pre-approval will accomplish that. Once pre-approved, you have some peace of mind knowing that a lender will not raise the rates on you for the next 120 days as they are guaranteeing the pre-approved rate.
However, a pre-approval is unfortunately not a guarantee that the lender has approved you already. A lender approval is only forthcoming once you have purchased a property and the lender can review your application in it’s entirety. As an example, it is at this time that the lender will request confirmation of your income via an employment letter and a paystub, request downpayment confirmation, etc. If you have less than 20% for a downayment, the lender will send your application to one of three insurers (CMHC, Genworth, or Canada Guaranty) for their approval. An insurer will only review and approve a “live” application and not for a pre-approval.
So why bother with a pre-approval if you don’t know 100% that the lender (and insurer) will, in fact, approve you? That’s an easy answer. Because you still need to know your home price range, confirm that there are no “skeletons” in your credit bureau report, and have some assurance that the lender has at least opened the door towards an approval with providing a rate hold for you. Some folks need to have certain debts paid out as part of an approval or perhaps be required to provide evidence of lease agreements in place on rental properties, personal tax returns or their CRA Notice of Assessments. In the process of obtaining a pre-approval, we inform our clients of the likelihood of the necessary documents a lender may request once you are approved.
When you have an accepted offer, your realtor will include a subject to financing date which normally does not exceed 10 working days. For most applications that is more than sufficient time for getting an approval from a lender and satisfying all the conditions of that approval. This process can be done in as little as a couple of days, especially when our clients have their employment letters, current paystubs, and downpayment confirmation ready for the lender to satisfy. A delay in providing all the necessary documentation to the lender may result in requiring an extension of time to satisfy your subject to financing clause. It is therefore best to discuss all of this with your Accredited Mortgage Professional prior to shopping for a home in order to eliminate any surprises. At The Mortgage Centre – BC Direct Mortgages, we work with you every step of the way to ensure a stress-free experience and get the desired results done fast!