The term “mortgage pre-approval” does not mean that you’ve been approved for a mortgage just yet. What it does mean, however, is that you have had your ideal home price calculated in order to determine how much you can spend on a home. This is a valuable step in the home-buying process that shouldn’t be overlooked or regarded as “an extra step.” Being able to focus your search of the local real estate market by knowing how much you can afford to spend will make it easier and faster to get out from under a rental agreement and into a home of your own.
What Does a Mortgage Pre-Approval do for Me?
More than anything, a mortgage pre-approval acts as a yardstick by which you can measure your own capabilities in buying a home. Not only does this process tell you how much you can afford in buying a home, period, but it also:
- Shows the monthly payment that you would be looking at, based on the price calculated
- Reveals what your mortgage’s insurance rate will look like for the duration of your first mortgage term
Additionally, getting pre-approved for a mortgage shows lenders and real estate experts that you are serious about venturing into the world of home ownership.
How do I Get Pre-Approved for a Mortgage?
The first step is to meet with a Toronto mortgage broker. This process is pretty simple and straight-forward. The amount that you will be pre-approved for is determined on a combination of your assets, your income, your debts and your credit rating. You will be required to provide a lot of information about yourself and your financial situation. Additionally, you may be asked to bring documents like:
- Proof of income, like pay stubs
- A document displaying your length of time employed by your current employer so far
- Financial statements, like from bank accounts
- Proof of other assets, like vehicles
- Documentation regarding any loans or other debts that you have accrued
Mortgage pre-approval does not guarantee that you will be granted a mortgage from the same lender that did the pre-approval process. What it does, however, is save you valuable time in obtaining a mortgage, illustrate your dedication to getting a mortgage, and let you know how much money you can expect to be working with as you move forward.