Becoming a homeowner is a lifelong dream for many Canadians but, as with all new experiences, there will be uncertainty. You will be interviewing realtors, looking at homes, stressing over bidding wars and, of course, qualifying for a mortgage. Here are the dos and don’ts of getting a mortgage pre-approval if you are buying a house in Vancouver:
What to do
Apply For a Pre-Approval First
Most Canadians think the first step to buying a home is to contact a realtor, but that is not entirely true. You should first apply for mortgage pre-approval. That way, if you find a home you like, you can move quickly since being pre-approved for a mortgage removes an extra step.
Just as you would look at several homes before settling on “the one,” you should also shop around for the best mortgage rate. Do not just go to your bank and expect to receive the best price. Compare mortgage rates and do your research or use a mortgage broker who can do that for you. Even just half a percentage point can make a tremendous difference in your payments and the amount of interest you will pay over time.
Assemble Your Documentation
Collecting all of the documents required for mortgage approval can take some time, so it is best to get started as soon as you can. Ask your mortgage broker to provide you with a list of the necessary documents to finalize your mortgage and begin organizing it all in one file
Read the Fine Print
Once you have been pre-approved, your Mortgage Professional will send your pre-approval document. This document will outline the interest rate you will receive, the loan terms, and the mortgage amount you have been pre-approved for. Be sure to read the fine print on every page carefully.
What not to do
Don’t Exceed Your Budget
Do not make the upper ceiling of your mortgage pre-approval your maximum purchase price. Do your own calculations to figure out how much you can actually afford each month and go from there.
Don’t Make Major Purchases
Once you have submitted your documents to the Mortgage Professional, your financial situation should not change from pre-approval to loan finalization. You do not want to change your financial situation because that could result in loan rejection, even if you were initially pre-approved.
Don’t Apply for New Credit
You also shouldn’t apply for new forms of credit like a line of credit or credit card and do not cosign a loan for a family member or friend. Otherwise, you may not qualify for a mortgage.
Don’t Quit or Change Jobs
A significant factor for your mortgage approval is steady, predictable income. Quitting your job to become self-employed or changing careers will throw a wrench into your mortgage approval plans. Instead, put off becoming an entrepreneur or changing employers until after you have the keys to your new place.