Deciphering the mystery of the pre-approval

Did you know there is a big difference between a pre-qualification and a pre-approval?

There is a plethora of terms out there regarding a mortgage pre-approval.

You are probably very aware of the importance of getting a pre-approval before you go house hunting, but do you know how to get yourself a genuine pre-approval?

One that is going to make the home buying process as easy as possible? Did you know there is a big difference between a pre-qualification and a pre-approval? Now that I have you interested let’s dive right in.

Mortgage pre-qualification is the term often used when the information has been provided by a borrower but is not yet verified.

Your information is entered into the computer and based on that data, your mortgage professional will tell you how much of a home you can afford.

It’s possible that your credit has not even been pulled depending on who you meet with. The problem here is that without a full suite of documents to examine and a close look at your credit bureau, your mortgage professional is not able to address any potential issues which may come up.

For example, in today’s busy market, you may end up in a bidding war with another buyer which could result in a shorter financing period.

You could lose the house of your dreams if an issue with your financing arises after a real application is taken. That’s sucky so how can you avoid this? Get a real mortgage pre-approval. That’s how.

A mortgage pre-approval will involve paperwork and credit bureaus and questions – oh my!

1. The application – you will be asked a series of questions. This will include your social insurance number, your employment history, your address history and a list of assets amongst other things of course.

2. The credit bureau – once you sign a consent form, your mortgage pro can pull your credit from Equifax.

They will take a very close look at your entire credit bureau and ask you questions if there are any concerns. Why? If we can see that in 2018 you had a history of late payments, I will guarantee that the lender can too, and they will want to know exactly why.

If we know ahead of time, we can address it right away which can expedite the whole process later.

3. The documentation – you are going to have to provide a whole pile of paperwork. Getting all this in ahead of time allows us to address any potential problems.

• Letter of Employment

• Pay stubs

• Two years Notice of Assessments and T1 Generals

• Proof of down payment

• Divorce or separation agreement

• Bankruptcy documents

• And whatever the heck else they ask for

4. The submission – once this is all put together, your pre-approval can go in to the lender.

They will look and decision the file which will still be subject to them approving the home you choose and the mortgage insurer also coming on board.

The thing is that you are going to have to provide all of this paperwork at some point, so you may as well do so ahead of time and rest easy in the knowledge that your financing is secure.

Keep in mind that even if you already own a home and are just looking to make a move, you should take the time to get yourself a pre-approval.

Just imagine selling your current home only to find out that you are no longer qualified to purchase the next. Yikes!!

And there you have it in a nutshell. How to successfully navigate the pre-approval process.

Pam Pikkert is a mortgage broker with Mortgage Alliance – Regional Mortgage Group in Red Deer.

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