When to get a Mortgage Pre-Approval?

Interested in taking the plunge to purchase real estate? A Mortgage pre-qualification can help you estimate affordability, and a Mortgage Pre-Approval can help you determine exactly what you are approved for so you can confidently house hunt.

For this week's article, I spoke to Patti Forster a TD Mortgage Specialist about all things Mortgage Pre-Approval.

Read below to see some common questions answered!

What is a Mortgage Pre-Approval?

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.

Why should I get a Pre-Approval?

Although, this is not required, it is helpful as it can give you a clearer picture of what your budget is. Once you have the pre-approval, we will hold the interest rate for a period of 120 days, subject to the other conditions of approval. If the interest rate goes down during this period, you can ask that your rate be adjusted to reflect the lower rate.

?What do I need to do a Pre-Approval?

We will ask that you provide the following information at the pre-approval meeting:

• ?Current address and Previous address (if you haven't been at your current address for 3 years)
• Current employment information (ie employer's name, address and job description)
• Previous employment information (if your current employment is less than 3 years)
• Sources of your income (paystub, employment letter, confirmation of direct pay deposits and T4s)
• If you are self employed, we will ask for your last 2 years personal tax returns and Notice of Assessments
• Confirmation of what assets you hold(ie real estate, investments, automobiles and savings)

When should You Get A Pre-Approval?

There is no 'right' answer, but if you are interested in purchasing real estate, it is best to know what you can afford based on your particular situation (based on your down payment, income and expenses, credit score etc.). Completing the pre-approval process with a Mortgage Specialist will help you understand the process of purchasing a home and obtaining a Mortgage, and may also provide information you may have missed or did not know about.

Having the Mortgage Pre-Approval can provide you with a sense of comfort when you take the next step to go house hunting, knowing you are looking at the right prices.

Not Sure you are Ready for a Pre-Approval?

Pre-Qualification:

If you think its a bit too soon still, and you arent quite ready to start looking to purchase a property, but are saving for a down-payment, or seriously considering purchasing a property in the future, you can do what is called a "pre-qualification" instead of a pre-approval. A mortgage pre-qualification is often a basic financial evaluation. There are plenty of online "affordability" calculators, which help estimate what you could qualify for based on your own inputs.

Try this Tool: The TD Mortgage Affordability Calculator is an online tool that can help you estimate your home buying budget before you apply for pre-approval.Try the?Mortgage Affordability Calculator

Resources:

Getting Preapproved for a Mortgage - Government of Canada

Mortgage Pre-Approvals - TD