The ins and outs of mortgage pre-approvals
When you’re house hunting, it’s important to know the amount of mortgage you qualify for, your monthly payments, and that your interest rate will be held for a specified period of time i.e. 120 days. Getting a mortgage pre-approval ensures that you can shop within your price range, you don’t have to worry about rates rising, and both realtors and sellers will know you’re serious. Be realistic though and make sure you can afford that pre-approved amount; review all of your homeownership expenses and your monthly budget.
But, not all pre-approvals are the same!
Heads up: a mortgage pre-approval is not a mortgage approval! Some are just a simple rate guarantee subject to lots of conditions. Getting pre-qualified – through an experienced mortgage broker or a really thorough mortgage lender or bank – is even better. To be truly pre-qualified, you need to submit your application plus all your income and down payment documents for review, in addition to getting your credit checked. Even then, it’s still a good idea to have a financing condition in your purchase offer, because your property will still need to be okayed by the mortgage lender. Be sure to not make significant changes after getting the pre-approval. Changing jobs, getting new debt – credit cards, loans, or buy-now-pay-later payment plans, missing payments on mortgages, loans or other liabilities, co-signing a loan for someone else, or using your down payment money to pay down another debt? All of these can jeopardize your ability to get a mortgage. Wait until after you’ve taken ownership of your new place before doing any of this.
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For more info on first-time homebuying and pre-approvals, click here to read more.