Get Pre-Approved For A Mortgage

House Hunting In Toronto Team™

First-time Home Buyers

Rick McGuigan & Robert Holbrook - Real Estate Sales Representatives - Phone: 416-569-0846

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HomeLife/Cimerman Real Estate Ltd., Brokerage - (Independently Owned and Operated) - Brokerage Phone: 416-690-6363

Not long ago, anybody with a job could get a mortgage. These lending habits were unsustainable. Today, it takes good credit and the right income and references to get a mortgage.

Before completing a mortgage application, make sure that you are prepared for the mortgage application process. Whether the lender approves your loan application will be determined by an evaluation of the following:

Capacity:

Do you have enough income to repay the debt?

Credit history:

Do you pay your bills on time and do you live within your means?

Capital:

What are your current assets?

Collateral:

What assets can you pledge as security against the mortgage?

Neither a high income nor an exemplary credit report alone is enough to make your loan application stand out. What lenders like to see is strength and stability in all four areas. Borrowers who are qualified, but whose down payment will be less than 20 percent of the purchase price of the home must withstand a second level of scrutiny. That is because mortgage insurers also have to approve such loans, and they have completely different qualification ratios.

A mortgage approval should take only a few days, but it is probably best to allow up to two weeks. During this process, the lender will do a credit check and spot check other information you have provided. In addition, an appraisal of the value of your home may be obtained. Unfortunately, when you are in the middle of the house hunting process and you come across your dream home, you will not have time to await mortgage approval. Also, the home seller might not consider your Offer to be worthwhile if you cannot show you will be able to finance the deal. Do not worry though. There is an easy solution: Get pre-approved.

Get (Pre-) Approved For A Mortgage

Your Credit Score

If you are planning to buy a house, think about your credit history first. The people who lend money do! How well you have handled your credit obligations in the past is of the utmost importance to lenders today.

Ideally, your credit report is an accurate, up-to-date reflection of your credit history. However, since we do not live in an ideal world, there are many reasons that your credit report could contain inaccuracies that might prevent you from receiving the credit you deserve.

A credit report is a snapshot of your current credit information. It includes a list of your creditors, payment history, balances, and late payment history (if any). It also includes any inquiries made by creditors to which you have applied for credit.

Many inaccuracies on a credit report can be the result of simple human error, and are therefore not difficult to dispute. Whether the inaccuracies relate to payments not credited, late payments, or data mixed in from the credit file of someone else with a name similar to yours, you will want to contact the credit bureau to dispute inaccurate information promptly.

One of the most important elements of credit is a demonstrated history of on time payments. Once you send the cheque through, anything can happen – a delay in the payment being received can kick you over to a 30-day delinquency. If you call your creditor and explain the situation, they might adjust the information.

If you are shopping around for a loan or more credit, you should know that when creditors check your credit, it places an inquiry on your credit report. Inquiries can add up, which is often interpreted as a negative by creditors. For this reason, too many inquiries can actually make getting credit more difficult. Moreover, if you did not authorize someone to look at your credit report and they did, they may have broken the law.

It is a good idea to check your credit report for inaccuracies at least once a year. If you find inaccuracies, contact a credit reporting agency in writing within 30 days.

To obtain a free copy of your personal credit file, send a written request to one of the following credit reporting agencies:

Equifax Canada Inc.

Consumer Relations Department

Box 190 Jean Talon Station

Montreal, Quebec

H1S 2Z2

Phone: 1-800-465-7166

Requirements:

Equifax requires a written request including: your name, address, date of birth and Social Insurance Number. Please also include photocopies of two forms of identification and remember to sign your request.

Trans Union of Canada

Consumer Relations Centre

P.O. Box 338, LCDI

Hamilton, ON

L8L 7W2

Phone: 1-800-553-9980

Requirements:

Trans Union requires a written request including: your name, address, previous address (if present address is less than 5 years), phone number (optional), date of birth, place of employment (optional), and Social Insurance Number (optional).

A pre-approved mortgage is very common. With pre-approval, your lender approves the amount of your mortgage and gives you a written confirmation or certificate for a fixed time period before you start looking for a home. The pre-approval term, usually lasting from 60 to 90 days, also sets the mortgage rate the lender will offer you. If rates go down in the specified period, the lender should offer you the new lower rate. Note that a pre-approval letter from a lender is not a guarantee from the lender that a loan will be provided.

Do not confuse pre-approval with pre-qualification. While shopping for the best loan terms, you may be tempted to pre-qualify with more than one lender. If so, be careful. Too many pre-qualifications could affect your ability to borrow money. Every time you apply for a loan, the lender checks your credit history. These checks show up as inquiries on your credit report and they have the same effect as alarm bells. There are numerous tools available on the Internet to check wether or not you may qualify for a loan without providing personal information. Online pre-qualification tools requiring personal data are a very huge risk and our best advise is to avoid them at all costs. Instead, do your home work and talk with a certified mortgage loan professional.

Advantage 1:

If you apply for a pre-approved mortgage before starting your new home search, you can define your price range and focus on homes that fit that scope. This will help to ensure that your realtor shows you only properties that you can afford, and save both of you time in the house hunting process.

Advantage 2: Increase Bargaining and Negotiating Power

If several buyers are interested in the same property that you are, being pre-approved can give you the advantage. Sellers are more likely to accept an offer from a buyer who has been pre-approved over a buyer who has no guarantee that they can attain the financing for the amount they offered.

Advantage 3: Gain Confidence and Avoid Disillusionment

Now when you find that perfect home, nobody can take it away from you by telling you that you do not qualify to buy it. You can minimize anxiety and remove last-minute loan surprises that could disqualify you.

Advantage 4: Enjoy a Faster Closing Period

Because there is no window period while your loan application is processed, the lender can speed up the entire processing procedure.

It's important to note that raising your credit score is a bit like losing weight: It takes time and there is no quick fix. In fact, quick-fix efforts can backfire. How to improve your credit score?

Pay your bills regularly and on time.
If you have missed payments, get current and stay current.
Keep your credit card balances low.
Do not apply for too much credit.
Pay off debt rather than moving it around.
Apply for and open new credit accounts only as needed.

Have credit cards - but manage them responsibly.

For a small fee of approximately $15, you can also have direct access to your credit report online (click the company logo above to visit the website).