Are you serious about buying a home? Before you go house searching, get a mortgage pre-approval. It streamlines the process and demonstrates to real estate brokers that you are a genuine buyer.

Continue reading to learn more about mortgage pre-approval and how it works.

What is a Mortgage Pre-approval?

Pre-approval is as close as you can get to confirming your creditworthiness without having a purchase contract in place. You will complete a mortgage application, and the lender will verify the information you provide. They’ll also perform a credit check. If you’re pre-approved, you’ll receive a pre-approval letter, which is an offer (but not a commitment) to lend you a specific amount, good for 90 days.

Getting pre-approved is a smart step to take when you are ready to put in an offer on a home. It shows sellers that you’re a serious homebuyer and that you can secure a mortgage – which makes it more likely that you’ll complete your purchase of the home.

Why Do You Need to Get Pre-approved?

Are you on the fence about getting a mortgage pre-approval? Here are five convincing reasons why you should be pre-approved before beginning your real estate search.

1. Simplifies the House Searching Process

When you show an interested real estate agent your pre-approval letter, it will make it easy for you to buy a home in a competitive market. The agent is able to move ahead with your offer with confidence, knowing you’re a serious buyer who’s ready to buy.

2. Establishes Borrowing Power

Pre-approval ensures you can borrow the maximum amount possible from different lending sources, including:

A pre-approval letter identifies that you are a reliable borrower and often qualifies you for competitive interest rates and terms.

3. Avoid Disruptive Underwriting

You may not be able to purchase a home without a pre-approval letter. When you proceed to the next step of the home buying process – submitting an offer – without a pre-approval letter, the lender may subject you to a credit check and ask for more information. This can affect your ability to get your offer accepted.

4. Helps You Close Faster

You don’t have to wait for approval before checking out homes. That’s because, unlike pre-qualification, a pre-approval letter includes approval for specific financing terms.

The approval process is held off until you find the home you want. This will expedite the process, which in turn, will shorten the time it takes you to get your offer accepted. And that means you’ll get home quicker.

5. Gives You More Room to Negotiate

When you’re ready to put in an offer on your home, you’re ready to negotiate. Pre-approval gives you the upper hand when dealing with real estate agents and sellers. Prove you have financing lined up to reduce their concerns about your ability to purchase the home. It’s a win-win situation for both parties.

Is a Mortgage Pre-approval the Same as a Mortgage Pre-Qualification?

Pre-qualification is a simpler and less detailed process than pre-approval. For pre-qualification, you’ll answer a few questions, provide basic information, and perhaps go through a credit check.

To qualify for pre-qualification, you only need to show that you’re a reliable borrower who has steady income, a good credit history and enough money for a down payment. With pre-approval, you’ll provide more specifics about your financial situation and agree to a more thorough credit check.

Conclusion

Getting pre-approved is a smart step to take when you are ready to put in an offer on a home. It shows sellers that you’re a serious homebuyer and that you can secure a mortgage – which makes it more likely that you’ll complete your purchase of the home.

When you’re ready to purchase your first mortgage application in Ontario, Mills Financial Group can help you. We can provide you with a loan solution that is perfect for your needs. Get in touch with our team today to know more!