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Mortgage Pre-Approval? Why

Pre-approval is one of the most important steps in demonstrating your financial ability as a buyer.

It’s essential to understand what qualification entails before taking this next step in your homeownership journey!

What is a mortgage pre-approval?

When you get pre-approved for a mortgage, you’ll know

  • The maximum amount you can borrow
  • The amount of your monthly mortgage payment associated with the maximum loan
  • The rate for your first mortgage term

When you get pre-approved, you are guaranteed the current rate for 30 to 160 days (depending on the lender). This protects you in the event of a rate increase. Plus, if interest rates drop during that time, your lender will give you the lower rate.

Power of negotiation

Pre-approval of a mortgage loan is an asset when presenting your promise to purchase. You also signal your serious intent to sellers, which will ensure the most professional service when making offers on potential homes.

In addition, sellers of competitively priced properties are more likely to accept yours with a pre-approval highlighting personal financial reliability.

How do I get pre-approved for a mortgage?

In order to get the best mortgage options available, you will need to complete a detailed application with the lender of your choice. Based on certain qualifications such as eligibility criteria and documentation provided, they will be able to offer you maximum loan amounts and terms to suit your needs.

Down payment

The down payment on a purchase is the amount of money before mortgage that you pay up front when buying a home.

In Canada, the minimum down payment is 5% of the value of the property – in this case, that means $15,000 for a home worth $300,000. While it is possible to make a down payment of less than 20%, mortgage insurance will be required if the risk of default becomes too great for the lender.

Making larger payments not only reduces these concerns, but also lowers the total loan amount and even reduces interest rates over time!

Debt to equity ratio

Your debt ratio is based on two calculations to determine the maximum level of your monthly mortgage payment. The calculation is based on your monthly income, your expenses and your other current debts. Lenders use the results to ensure that you can make your monthly payments while still meeting your other financial obligations.

Additional documents

Depending on the mortgage broker or lender, the documentation for your pre-approval application may vary. For example, some mortgage brokers require proof of income for a pre-approval, while others only require it when finalizing the application.

Here is a list of documents you may be asked to provide when you apply for a mortgage pre-approval:

– Identification

– Proof of income (pay slips and a letter from your employer, or a notice of assessment if you are self-employed)

– History with your employer

– Proof of down payment amount and ability to pay closing costs (most recent financial statements, bank account and financial portfolio)

– Proof of any other assets you own, such as a car, house or boat

– Information about your other debts:

o Credit cards or line of credit or Spousal or child support amounts

o Student loan balances

o Car leases

o Personal loans

o Etc

A mortgage broker or a mortgage professional, how to choose?

A Mortgage Professional and a Mortgage Broker are both mortgage experts. The direct seller works for a financial institution (a bank) and offers the mortgage products of this institution exclusively, while the mortgage broker works for an agency and offers the mortgage services of several mortgage lenders (several banks). Both experts look for the mortgage product that suits your financial situation and your expectations.

Our brokers at REALTA will be happy to suggest a list of mortgage experts that suit your financial profile & goals.

Now what?

Once you are pre-approved, you will be able to know exactly how much you can borrow. You’ll also know the mortgage rate for your first term.

And if you lock in that rate, you’ll be protected from future increases for the next 30 to 160 days. You can then take the maximum mortgage amount and use it as a criteria for your search.

That way, you’ll only be visiting homes that are for sale in your price range.

Thinking of buying a property?

Our team of real estate experts is at your disposal. Ask your questions at!


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