Get Information From A Source You Trust
It’s natural to have questions. Besides the basics such as the interest rate and term, it’s a good idea to ask about other things like prepayment charges if you plan to sell your property or pay down your mortgage loan faster. To ensure that you get accurate, actionable information we recommend seeking answers from a trusted source. TD Mortgage Advisors are well versed in every aspect of the mortgage process and can be an easily accessible source of information.
A Lenders Incentive To Give You A Loan
You can also think of this from a lenders point of view. Banks are not handing out mortgages to be nice or to give people a helping hand. They are trying to earn interest on your loan. So to them, this is a revenue-earning business. It would not be a wise business decision to lend large amounts of money to someone who already bears significant debt, who doesnt pay bills on time or who does not have a consistent work history.
Ultimate Mortgage Preapproval Checklist
When a lender preapproves you for a mortgage, theyre saying that, based on the information provided, youre in a good position to uphold the financial responsibilities of your loan and that you can afford the monthly payments. Preapprovals also determine how much youll get approved for, so its important to get preapproved before buying a home.
In order to preapprove your mortgage application, the lender will need certain documents to verify your income, job stability and other factors. It can be hard to keep track of it all, so were providing you with this mortgage preapproval checklist to help keep things in order.
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How Can I Increase My Mortgage Pre
Make sure that the prospective lender has accurate information, particularly on income and liabilities that you may have. You can ask to see the credit report that the lender used, and if you believe that it contains errors, you can contact the relevant credit bureau. Youll also need to contact the company that provided the information. You can also try other lenders, which might have different criteria. Remember, however, that multiple credit checks in a short time period can hurt your credit score.
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Mortgage Preapproval Vs Prequalification: What’s The Difference
When you’re shopping for mortgages, you’ll likely encounter a process called mortgage prequalification, which should not be confused with mortgage preapproval. Mortgage prequalification generates an estimate of how much money you may be eligible to borrowbut no details on interest rates, fees and the likeafter you answer a few quick questions online or over the phone about your income, assets and debts.
Mortgage preapproval is a much more formal process that requires you to complete a detailed mortgage application form , submit supporting documentation to back up your financial claims, and undergo a thorough examination of your credit reports and scores. Because applying for mortgage preapproval is essentially the same as applying for a mortgage loan, you may also have to pay an application fee.
Some real estate agents might like to see a mortgage prequalification before agreeing to work with you. But because a prequalification may not include any examination of your credit history or other documentation proving your finances, it won’t carry nearly as much weight with sellers as a mortgage preapproval.
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Common Documents Required For A Mortgage Pre
Even though many lenders are still quoting quick 10 minute over the phone or online, a true mortgage approval that holds any weight is one that has been issued by an underwriter who has had an opportunity to review all of the necessary documents.
With a constant stream of new lending guidelines, and tightening regulation from Washington, very few real estate agents will show new homes to a without at least a pre-qualification letter.
A Pre-Approval Letter will help you in three ways:
- It lets you know
- It gives you an estimate of what your total
- Submitting a strong Pre-Approval letter with a purchase offer will give the seller more confidence about your ability to complete your end of the agreement
Its obviously a good idea to get your paperwork prepared ahead of time so that the pre-approval process is as thorough as possible.
In order to get a pre-approval letter, youll start by filling out a loan application and submitting a few documents for the loan officer and / or underwriter to review.
There’s No Need To Choose A Lender Just Yet
Getting preapproved is important because it helps you shop for a home. But at this stage, lenders arent in a position to give you enough information for you to make a decision about which lender offers the best deal. Getting a preapproval doesnt commit you to using that lender for your loan. Wait to decide on a lender until you’ve made an offer on a house and received official Loan Estimates from each of your potential lenders.
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The Importance Of Mortgage Pre
What you think you can afford and how much your lender is willing to give you can sometimes be very different. You want to make sure you have a full understanding of how much you are pre-approved for early in your home buying journey. Those with low credit scores, self-employment under three years or other kinds of debt may find it more challenging to get pre-approved for the amount they want.
Some realtors wont take you house hunting until you go through the pre-approval process, because you need to first know what you can borrow in order to look at houses in your price range. Getting pre-approved will help you narrow down your search and find a home that will work in your financial plan.
How To Get Pre Approved For A Mortgage
Are you wondering how to get pre approved for a mortgage? Its one step in the home buying process you shouldnt overlook.
Mortgage pre-approval means that a lender has conditionally approved you for a set home loan amount, based on your credit and finances. Having a mortgage pre-approval letter in your pocket can streamline the mortgage application process later since the lender already has your information and has verified your documents.
Although some information can change and the lender may need to re-verify some of your documents, your credit standing cannot change during the commitment period without impacting your loan.
Changes in the financial conditional and application information could jeopardize the approval status of the application. Avoid taking on additional credit obligations during this period.
Additional contingencies may include an approval up to a maximum interest rate since the rate cannot be locked until the ratified purchase contract is received.
A pre-approval can also give you an edge when youre ready to make an offer on your new home. The pre-approval shows sellers that youre committed to buying and that you can back up your offer with financing. In a bidding war, a pre-approved buyer may win over a buyer who hasnt started the application process.
How to get pre approved for a mortgage starts with knowing what to expect.
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Does Preapproval Affect Your Credit Score
Getting preapproved for a mortgage has an impact on your credit score. Thats because when lenders check your credit, they perform a hard inquiry, which can drop your score by a few points. The good news is that the effect is small, and gets even smaller as time passes: Hard inquiries come off your report entirely after two years.
If youre planning to get a preapproval from more than one lender, aim to do it within a 45-day window to avoid more damage to your score than necessary. Inquiries within this time frame will be counted as one inquiry, instead of multiple.
Questions To Ask Your Lender Or Broker When Getting Preapproved
When getting preapproved, ask your broker or lender the following:
- how long they guarantee the preapproved rate
- if you will automatically get the lowest rate if interest rates go down while youre preapproved
- if the pre-approval can be extended
Ask your lender or broker about anything you dont understand.
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When To Get A Pre
Mortgage pre-approval letters are typically valid for 60 to 90 days. Lenders put an expiration date on these letters because your finances and credit profile could change. When a pre-approval expires, youll have to fill out a new mortgage application and submit updated paperwork to get another one.
If youre just starting to think about buying a home and suspect that you might have some difficulty getting a mortgage, going through the pre-approval process can help you identify credit issuesand potentially give you time to address them.
Seeking pre-approval six months to one year in advance of a serious home search puts you in a stronger position to improve your overall credit profile. Youll also have more time to save money for a down payment and closing costs.
When you are ready to make offers, a seller often wants to see a mortgage pre-approval and, in some cases, proof of funds to show that youre a serious buyer. In many hot housing markets, sellers have an advantage because of intense buyer demand and a limited number of homes for sale they may be less likely to consider offers without pre-approval letters.
So Why Would You Use The Services Of A Mortgage Broker
Mortgage Brokers are usually free and can save you a lot of time and money. Not all banks have the same lending criteria and whilst one bank may decline your loan another may approve it. Having a mortgage broker working for you means that you only need to complete one application and then leave your broker to shop around the banks to get your home loan pre-approval. Additionally, in order to get the best rates, you really do need to shop around, again your Mortgage Broker will do this for you! Whilst rates are important, ensuring that your home loan is structured well can save you thousands of dollars and get you mortgage free sooner, a good Mortgage broker will assist you with this too! If you decide to use the services of a Mortgage Broker it pays to check out their credentials and experience to make sure you have a broker who is qualified to help you. Mortgage Brokers are now required by law to be registered. You can check to see if your Broker is registered by going to the Financial Markets Authority website Registered Financial Advisors are also required to provide all clients with a disclosure statement covering the following
- Type of Advisor they are
- Where to go if something goes wrong.
- How they are regulated
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Accepted Offer Documents Needed For Mortgage Approval
Keep in mind that just because you have your mortgage preapproval completed it does not mean that you are guaranteed a mortgage for every property you write an offer on.
In order to finalize your mortgage, the lender will also review documents associated with the property and confirm that they are willing to lend you the money to purchase. If a property has major issues with things like leaking, then the bank may not be willing to finance that purchase. Therefore, the mortgage process involves both documentation regarding yourself/your income and the property you are purchasing.
*Upon coming to an agreement with a seller, you will need to provide:
- Purchase and Sale Agreement include schedules and waiver
- Additional costs related to the property such as heating costs
- MLS Listing with photo which will include property taxes, additional strata fees , square footage, style of home, etc.
- Depreciation Report, Form B, recent strata minutes, and other strata documents if strata
- An appraisal by the bank may also be required, specifically if you are putting more than 20% down.
- Your lawyers, builders and realtors names, addresses, postal codes, telephones, fax numbers and email addresses, as well as the contact information of the seller, if applicable
What Is Mortgage Pre
A mortgage pre-approval means that the lender has qualified you for a certain loan amount based on your current financial situation. It’s not a guarantee that you will get the funds though. Once you settle on a home, you’ll still have to go through a final approval process, but the pre-approval should give you a good amount of confidence that you will qualify for the amount indicated in the pre-approval. It also locks in your rate for typically 60 130 days, which means that you can rest easy even if rates go up during that time period. .The pre-approval process can take a few days or up to a few weeks. This approval time can be cut down to just minutes if you opt to apply for a pre-approval online with Scotiabanks online mortgage hub eHOME. You will have to provide your lender or broker with some personal information and documents. These can include:
- Government identification
- Proof of income
- Proof of a down payment or ability to cover closing costs
- Length of time with your employer
- roof of any other assets
- Information about your other debts – particularly how much you owe and pay monthly on them
The lender may perform a hard credit check. If you have a permanent job with an employer, the application is usually quite straightforward, but if you have multiple jobs or are self employed, you’ll have to provide more documentation.
During the pre-approval process, ask your lender to clarify any questions that you may have. Some questions to ask may include:
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Copies Of Any Court Orders
When applying for a mortgage, you can also use alimony and child support payments for qualifying purposes.
However, your lender will request copies of your divorce decree or other court orders to verify how much you receive in support payments.
Theyre strict rules regarding whether youre able to use child support or alimony when buying a home.
In most cases, you must have received these payments for at least six months before qualifying for a home loan.
Also, payments must continue for at least three years after closing.
Which Is Right For Me
First-time homebuyers are more likely to find that getting prequalified is helpful, especially when they are establishing their homebuying budget and want an idea of how much they might be able to borrow.
Preapproval can be extremely valuable when it comes time to make an offer on a house, especially in a competitive market where you might want to stand out among other potential buyers. Again, a seller will be more likely to consider you a serious buyer because you have had your finances and creditworthiness verified.
Ready to prequalify, get preapproved or apply? Get started with the Digital Mortgage Experience.
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What Do You Need For A Mortgage Preapproval
Because mortgage preapproval requires submitting a mortgage application, it’s a detailed process. Items you should be prepared to submit with your application include the following:
- Personal details: The lender will require proof of identity, such as a copy of a passport or a driver’s license, and your Social Security number.
- Permission for a credit check: You’ll also be asked to authorize access to your credit reports and your credit score. It’s wise to check your credit report and yourself at least six months before starting the preapproval process to avoid surprises and to give you time to clear up any credit report inaccuracies that might be lowering your credit score.
- Income information: To document your income, you’ll need to provide pay stubs, bank statements and tax returns for the past two years. If you are self-employed, the lender will average the annual incomes you reported on your tax returns for the previous two years.
- Assets and debts: Mortgage lenders typically like to see indications that you have resources available to cover your loan down payment and to help make your loan payments in case your employment status or income changes. Assets can include savings, investments and property you own. Outstanding loans and credit card balances will appear on your credit reports, but you’ll also be asked if you have any other debts as well.
Note that requirements for down payments and other assets may vary by loan type:
Youre The Only One Who Can Decide How Much You Can Afford To Spend On A Home
Lenders preapprove you by looking at your income, assets, debts, and credit record. But your financial life is much more complicated than that. Only you can decide how much youre comfortable paying upfront and each month which means only you can decide how much to spend on a home.
- If you were preapproved for more than the home price budget you set for yourself, you can use the preapproval letter to shop for homes without changing your target home price. If youre happy with the amount you planned to spend, stick with your original budget.
- If you were preapproved for less than you were planning to spend on a home, talk with the lender. Ask if there was a particular factor that limited the preapproval amount. You may need to adjust your home price expectations.
- Be upfront with your real estate agent. If you dont want to see homes above a certain price, say so. Limiting your search is a good way to avoid falling in love with a home that costs more than you want to spend.
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