Monday, March 20, 2023

How Mortgage Pre Approval Works

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Can You Get Multiple Pre

How Does a Mortgage Pre Approval Work?

Doing multiple pre-approvals in a short space of time can leave a black mark on your credit score, since the lender will usually run a credit check, at least with full pre-approval assessments. This leaves an enquiry on your .

So try to settle on one lender and one lender only and then seek pre-approval.

How Does The Pre

When you apply for pre-approval, the lender will take into consideration your overall financial situation, and typically need to verify your identity, income and expenses. This involves providing paperwork such as payslips and proof of any other sources of income such as bonuses or of rental income, plus details ongoing expenses.

The lending criteria also includes providing documentary evidence of all your assets and liabilities. While assets can range from savings and superannuation to investment properties, liabilities can include personal loans, credit card statements and Buy-Now-Pay-Later debt.

At this stage, the lender will also do a credit check – this basically means they will check your credit history to get a clear picture of your past credit accounts and repayment behaviour.

Apart from ensuring your ability to make the loan repayments, these checks and balances could reveal things like an old credit card debt or something similar, that you may have forgotten about at an earlier stage.

Once its established youre a suitable candidate for a loan, the lender would issue you a written pre-approval clearly outlining the conditions. How long this process takes usually depends on your situation, but the lender would keep you updated on the progress of your application. And this doesnt cost anything its free from obligation for both parties.

How Much Should I Get Pre

The good thing about pre-approval is it can give you a clear understanding of what you can and cant afford to borrow, as lenders will assess your financial situation and indicate he much you can afford to repay.

Generally speaking, you should only try to get pre-approved for what you can reasonably afford, not what you might be able to afford. Take note of your recent bank statements, investment reports and savings buffer, and input this information into a borrowing power calculator to get an idea of what you could afford to pay for, then approach a lender for pre-approval.

Dont set your expectations too high, as this can lead you into a mortgage thats too big for you.

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How Long Does A Mortgage Approval Take

So Mo, once you’ve selected a home, you’ve actually gotten your pre-approval, how long does the true mortgage approval take?

Mujtaba Syed:

From the time the clients submit documents, or let’s say the lenders sumbit documents to the underwriter, which is an individual in the back end of the file that assesses it, it should only take 24 to about 48 hours maximum.

It shouldn’t take longer than that.

Now, there could be some odd situations where there could be system delays or there’s a backup or a log that’s kind of moving very slowly.

But your lender will be able to tell you that at that time, because they technically have an idea.

But usually, if everything’s going smoothly, it should be 24 to 48 hours, no longer than that.

What To Do If A Lender Refuses Your Mortgage Application

A Guide to Home Loan Pre Approval

A lender could refuse you for a mortgage even if youve been preapproved.

Before a lender approves your loan, theyll verify that the property you want meets certain standards. These standards will vary from lender to lender.

Each lender sets their own lending guidelines and policies. A lender may refuse to grant you a mortgage if you have a poor credit history. There may be other reasons. If you dont get a mortgage, ask your lender about other options available to you.

Other options may include:

  • approving you for a lower mortgage amount
  • charging you a higher interest rate on the mortgage
  • requiring that you provide a larger down payment
  • requiring that someone co-sign with you on the mortgage

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Does The Interest Rate Depend On The Length Of Mortgage Pre

Yes. The length of time your offered interest rate is locked-in for after pre-approval plays a role in determining your interest rate. The longer the time, the more risky it is for the lender as they still have to offer you the lower rate even if their other rates increase. However, this is not the main factor that determines your interest rate: other important factors include your credit score, whether your documents are complete, and your financial situation. In general, if a lender deems you to be a risky borrower who may lack the ability to pay them back, your interest rate will be higher.

When Should I Apply For Pre

It helps to plan this strategically. Start with doing your research, so you have an idea about the price range of the new home you are looking to buy, based on the current property market, and how much deposit you can afford. This is a good time to complete an application online.

Another easy way to get a sense check on your own borrowing capacity is with our online mortgage calculator which gives you an estimate of the maximum loan amount you might be able to borrow. You could also try and work it out using the affordability calculator which bases the loan calculations on how much you are comfortable repaying each month.

Its a good idea to think about the loan term and different types of home loans at this point too. Your lender can help you understand whether a fixed interest rate or variable rate loan, or a combination of both, is best suited for you.

Most pre-approvals are valid for three months, including ours, although the timeframe may vary between different lenders. Our approval in principle can be renewed at the end of the 90-day period, if required, provided your financial situation hasnt changed.

You can start the application process any time, but it may be a smart move to not apply too early in the game, if you are not serious about looking to buy.

So, a good time to put in an approval application is when your other credit accounts are in good standing, youve saved a deposit and ideally, youre zeroing in on your dream home.

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Unacceptable Properties May Be Rejected

The lender might ask you what type of property you want to buy, or might include a condition called subject to satisfactory valuation. This means your pre-approval could be terminated if youre buying what the lender deems to be a risky property, which are often:

  • Properties near large power lines
  • Properties that are very run down
  • Properties in particular suburbs

Definitely remember to ask your lender about what sorts of properties they will and wont accept.

Is There Anything Better Than A Mortgage Pre

How Does The Mortgage Approval Process Work? Step-By-Step

With this competitive housing market, mortgage pre-approval letters have unfortunately started losing their authority. Most buyers have them, and in a multiple-offer situation, they just dont have what it takes to make you stand out.

Fortunately for you, theres something better!

If you want a true competitive advantage, Churchill Mortgages Certified Homebuyer program is a great option. When you become a certified homebuyer, you have all the advantages of a pre-approval like credibility as a homebuyer, confidence in your search, and an accelerated closing process.

But unlike with pre-approved mortgages that only involve a loan officer, your certified homebuyer application is reviewed by a mortgage underwriterwhich is a huge advantage when you start shopping for houses! Youll be able to close faster and have a leg up on other buyers who will probably have to wait for an underwriter to review their application.

Dont sell yourself short with a standard pre-approval. Take your home-buying credentials to the next level today and get in touch with a Churchill Mortgage expert!

About the author

Ramsey Solutions

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What Are Some Of The Questions You Probably Want To Ask When You’re Actually Going Out And Finding A Lender

Mujtaba Syed:

The biggest question I feel a lot of clients don’t ask is go into the nitty gritty of the terms and conditions of a mortgage.

Not every mortgage is built the same. There are certain aspects that let’s say are built into the mortgage where you have some certain stipulations, but you also have certain benefits built into a mortgage.

Say you want to prepay a certain amount, and let’s say this mortgage that you’re getting from a specific lender doesn’t let you prepay to the maximum amount that you are willing to do.

You would want to discuss that with them beforehand, and say, “I want to prepay 20% of my original mortgage balance every year. Can I do that?” And they might come back to you and say, “10%, that’s the maximum you can do. Anything over that now is … you’re going to be penalized.”

So now it doesn’t fit your budgeting and your criteria, I would actually go and speak to a lender that actually fits.

What Are The Benefits Of Pre

If you’re looking to purchase a house but you’re not sure how much you can spend, it’s difficult to know where to begin. You might find a property that seems perfect, but have no idea whether it’s a realistic option for your budget.

If a lender pre-approves you for a loan, they will do so for a specific amount, so you can focus your house hunting on the properties you can afford. Which might mean that you have to forget about that beachside mansion with tennis court and pool, but the whole process will be a lot easier. It also means that, if you’re bidding at an auction, you’ll have a maximum bid in mind.

For example, you may be looking at two different properties: one valued at $550,000 and one valued at $700,000. If you’re pre-approved for a home loan of $550,000, the more expensive house may be outside your budget, unless you contribute more of your own funds.

Pre-approval can also make you a more attractive buyer to a potential seller, as it indicates that you’re serious about purchasing the property and that your offer is less likely to be withdrawn due to a lack of financing.

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Provide Only One Bank Account If Possible

When loan officers request sixty-day bank statements, they mean a bank statement where they can document down payment and closing costs funds. Many borrowers may have multiple bank statements and lenders do not have to see all bank statements borrowers may have. If there is plenty of money in one particular bank statement, just provide that one bank statement. All costs involved with the purchase of the home and closing of the loan need to be verified and come from the borrowers personal bank accounts. Do not use business bank statements if at all possible.

Why Apply For A Mortgage Pre

Loan Pre

A mortgage pre-approval is an important part of the home buying process. If you are pre-approved, it means that a lender has stated that you qualify for a mortgage loan based on the information you have provided, and subject to certain conditions. A mortgage pre-approval often specifies a term, interest rate and principal amount. Although not a required step, it is helpful as it can give you a clearer picture of how much house you may be able to afford.

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Consider Other Associated Costs

As you go through the mortgage process, it’s important to think about the true cost of owning a home. Besides the costs required at closing and regular mortgage payments, there are other recurring costs such as property tax, home insurance, heating costs, condo fees and more. Even though pre-approval specifies an amount you may be approved for, consider a lower principal amount to reduce regular expenses while leaving money for other unforeseen expenses.

How Can A Mortgage Pre

It is common for buyers to put down a conditional offer for a home where certain conditions will have to be met before the actual agreement is finalized if one of the conditions is not met, the agreement will fall through and any deposit is returned to the buyer. The most common conditions include a clean home inspection, sale of the buyers current home, and financing. A buyer without a financing condition can stand out against other offers, but if the buyer ends up not being able to finance the purchase, the seller will keep your deposit and can sue you for damages associated with the termination of the offer. You may have to pay for any differences in price if the seller has to sell for a lower amount than your initial offer! Having a mortgage pre-approval can give you the confidence to waive the financing condition, but remember that mortgage pre-approvals are not guaranteed and you should make sure not to exceed your maximum limit.

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Do Rising Interest Rates Affect Mortgage Pre

Rising interest rates make mortgage pre-approvals much more relevant and meaningful.

Not only does a mortgage pre-approval give you the lenders estimate of your borrowing power, but it also offers you an interest rate hold for up to 120 days in many cases. In times of steady or declining rates, you barely pay attention to your pre-approval rate. But these days, this rate hold can be a total game-changer.

If you are pre-approved for a fixed-rate mortgage, you may find yourself in a very fortunate situation when rates increase, because as long as your mortgage funds while your pre-approval is valid, your mortgage lender should honour your pre-approval rate.

This past week, we have clients who completed their home purchase with pre-approved 5-year fixed rates of 1.89% a rate that simply does not exist anymore for uninsured mortgages.

Can I Bid On That Dream House At Auction


Once you have obtained conditional approval, you’ll be ready to take on the auctioneer. You can bid on a property at auction. If your bid is successful, you’ll then need to gain full approval.

Part of the final approval process involves the bank valuing the property you have purchased . So be wary of paying more than a fair price for the property, as this may affect the bank’s willingness to grant final approval.

We know that the home loan process can be daunting. When the time comes, donât feel like you have to do it on your own. You can visit a branch, call us on or set up an appointment. Your appointment can be in person, over the phone, via video or we can come to you. Or if youâre ready, feel free to apply online.

Ready to purchase your home? Talk to our home loan experts today.

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So how do we make money? Our partners compensate us. This may influence which products we review and write about , but it in no way affects our recommendations or advice, which are grounded in thousands of hours of research. Our partners cannot pay us to guarantee favorable reviews of their products or services.Here is a list of our partners.

How Solid Was The Pre

What went wrong that buyers who were pre-approved gotten either a last-minute loan denial, were told they do not qualify, or are stressing during the mortgage process?

  • How was the pre-approval issued?
  • Was it the loan officer that issued it or a mortgage underwriter?

Was the file fully underwritten or was a pre-approval letter issued within an hour or two after the loan officer took the mortgage application?

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How Are Occupancy Fees Calculated On New Condominiums

Ive heard occupancy fees referred to in a negative light many, many times, dubbed rent to the builder or phantom rent. Its often misconstrued, and some people even use it as a reason to avoid pre-construction.

Its actually quite simple, and it is less carry cost than youll have when your mortgage loan starts, so during this time youre seeing appreciation in the market with even less overhead. The fees are made up of 3 things:

How Is My Credit Score Determined

How Does Getting Preapproved For A Car Loan Work

Your credit score is based on many factors that play into how risky a borrower you could potentially be. If you have a history of paying your bills and debts on time, your credit score will slowly move up. If you miss a bill or payment, your credit score can drop significantly. Another factor that can temporarily affect your credit score is a hard credit check, which happens when you apply for a loan or line of credit. Lenders are wary of borrowers that suddenly try to borrow money from many different lenders. While the effect will only be temporary, you should try not to apply for a loan prior to getting your mortgage or pre-approval. This can include an auto loan, personal loan, or line of credit such as a credit card.

Some people may not have a credit score or have a low credit score despite paying all their bills on time because they havent borrowed much in the past. This means that lenders have less information to base their decisions on, which makes you a more risky borrower.

As a Canadian, you are entitled to one free annual credit report from each of the major credit reporters in Canada: TransUnion andEquifax. Some financial institutions also offer free credit scores and credit monitoring services as part of their product packages.

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