Buying your first home is an exciting life milestone. When the time comes to begin exploring the market, there are a few things you can do in advance to maximize your chances of success – like getting pre-approved for a mortgage.
As a first-time home buyer, obtaining pre-approval for a mortgage comes with a lot of perks. From establishing an informed budget to navigating interest rate fluctuations and increased buying power, it’s well worth it to cover this step before you begin house hunting.
Unpacking Pre-Approvals
Provided by a mortgage specialist or your bank, a pre-approval is a contract that provides you with conditional approval for lending a determined amount of money. Once you’ve found a home that you wish to buy, having a pre-approval will allow you to get set up with a mortgage relatively quickly.
Rather than grabbing a number from thin air, mortgage pre-approvals are based on an analysis of your personal financial health and credit history. With this in mind, if you’re seeking a mortgage pre-approval there are a few personal items you’ll need to be prepared to provide, such as:
- Identification
- Current and Past Employment Details
- Proof of Income
- Credit Check*
*Performed by the lender on behalf of the home buyer.
Preparing for your first-ever home purchase? As a leading real estate team with decades of experience, we can help you find a fantastic first home while ensuring the process is stress-free.
Knowing What You Can Afford
One of the foremost advantages of getting pre-approved for a mortgage before you begin house hunting is understanding what you can afford. When you get pre-approved the lender will establish a maximum borrowing amount. Not only can this step prevent you from overspending on a home, but it can also prevent you from shopping for homes beyond your price range, only to be disappointed down the line. In the same vein, obtaining pre-approval can make the process of finding your future home more efficient, as you’re able to refine your search based on your budget.
Unsure if you can afford a home in today’s market? With the right planning and expert support, you can stretch your budget further. Check out these helpful posts from our blog to learn more.
- How to Know If You’re Ready to Buy Your First Home
- What is ‘House Hacking’ and Why is it So Popular Among First-Time Buyers?
Get Locked In
Outside of the property itself, one of the largest costs that come with buying a home is the interest accumulated on your mortgage. The Interest rate applied to your mortgage will have a substantial impact on the size of your monthly payments and can impact your overall financial health.
As dictated by the Bank of Canada, interest rates can fluctuate, making mortgages more (or less) expensive overnight. Getting pre-approved can protect you from spikes in interest rates, helping you keep costs down. Once pre-approved, most Canadian banks offer an interest rate lock-in of around 120 days for first-time home buyers. This ensures you won’t need to adjust or change your budget while on the market.
Over the last several months, raising interest rates have been a hot topic in the world of real estate. For more insights explore our blog post on the topic here.
Strengthening Your Buyer Profile
When you find a perfect home, there’s a good chance that other buyers will be interested in it too. Therefore you’ll want to give yourself an advantage in ensuring your offer stands out from your competition on the market. Getting pre-approved is a great way to do just that.
Pre-approval shows sellers that you’re serious about buying their home and above all else – qualified to do so. In market conditions where contingencies are more common, having pre-approval provides the seller with peace of mind by showing them you’re able to afford their home.
Are you a first-time homebuyer in Ontario? Check out these helpful posts from our blog before you head to the market.
- How to Submit an Offer on a Home in Today’s Marketplace
- Looking to Buy a Heritage Home in Ontario? Read This First
- How to Make Your Move Budget-Friendly
Where to Start
As a first-time buyer, getting pre-approved for a mortgage can help you shop with confidence, establish your budget, and make your offers more appealing to sellers. That said, finding the right type of mortgage for you and working with a reputable local lender is equally as important as getting pre-approved.
Don’t know where to begin with finding the right mortgage for you? Ask your real estate agent. They’ll have a vast network of industry professionals to support your needs – including lenders and can point you in the right direction.
If you’re looking to be connected to a local mortgage specialist or wish to know more about the process of getting pre-approved, reach out to our team today!
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