What not to do before getting pre-approved for a mortgage?

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What not to do before getting pre-approved for a mortgage?: If you’re thinking of buying a property, it’s important to figure out how much you can reasonably afford to spend. Before granting you a loan, your financial institution will consider many factors to determine the amount it is willing to lend you. By getting your mortgage pre-approved before you start looking for a property, you’ll avoid having unrealistic expectations or falling in love with a property you can’t afford. nesto will get you pre-approved as soon as possible so you can start shopping for a property.

What is pre-qualification of mortgage applicants?

Prequalification gives you an estimate of how much you can borrow to finance your property. Your lender will make a preliminary assessment of your financial situation to establish the amount he agrees to lend you. You can get pre-qualified fairly quickly, and there’s usually no cost to you or impact on your credit rating. Additionally, pre-qualification can be helpful when making an offer while ensuring that you are looking for an affordable property.

Prequalification is only a general indication that your mortgage application may be approved — it is not a guarantee of financing or loan approval. You will need to submit additional information and documents that will need to meet your lender’s criteria to assess your ability to repay the mortgage. It is therefore best to avoid making definitive decisions based on your prequalification. It is far better to wait for your application to be pre-approved.

Pre-approval requirements

Not to be confused with a pre-qualification (see above), a pre-approval is a conditional commitment from your financial institution to grant you a specific amount of money at a certain interest rate based on your qualifications. By knowing the mortgage amount you qualify for, estimating your monthly mortgage payments, and locking in the rate, you’ll be able to make a smooth purchase and complete an efficient mortgage transaction.

It’s important to note that your pre-approved amount is likely the maximum amount you will be able to receive, but pre-approval does not guarantee that you will get a mortgage for that amount. In the end, the approved mortgage will mainly depend on the value of your property and the amount of your down payment. In addition, the mortgage rate offered to you during the pre-approval period is only guaranteed for a fixed period, usually 90 to 120 days.

When deciding whether to give you pre-approval or not, and then calculating how much you qualify for, your lender will weigh a number of important factors based on key documents. These may vary depending on your specific situation and the type of property purchased or from one lender to another.

The most frequently requested documents are:

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Identity documents

Although it may seem quite basic, verifying your identity is an essential step in the pre-approval process. Identity theft — the theft or compromise of your personal information — is a major and unfortunately all-too-common problem. Therefore, your lender will ask you to provide government-issued identification, such as a driver’s license or passport, showing your name, address, and date of birth.

Employment Verification

To ensure that you can make your monthly mortgage payments, your lender will want to confirm that you have a stable job. You will need to provide a letter from your employer stating your position and length of employment with the company. If you are self-employed, you will need to provide your notices of assessment for the last two years and may also provide additional information, such as the nature of the business, balance sheets, a statement of the results of the activities of the company and references.

Proof of income

Your lender will also want to confirm that your income has been stable for at least two years. You may need to provide tax slips and/or pay stubs. If you’ve had significant periods of unemployment or your employment situation has been unstable, you may find that the lender is less likely to give you a mortgage. If you are self-employed, your lender will want to see recent tax returns or other evidence that demonstrates your ability to generate enough income to meet your mortgage payments. You will also need to provide proof of any other sources of income, such as salary from a second job, commissions, bonuses or investment interest.

Proof of Assets

Assets include all of your possessions that have monetary value and can be easily liquidated. For example, money in your savings or checking accounts; investments; goods; vehicles, including cars, boats and recreational vehicles; and other valuables like jewelry and artwork. Your lender will ask you for detailed information about your assets and their corresponding values to determine their total value. It’s important that they know that if you ever run into trouble, you have access to funds and therefore can continue to make your payments.

Credit rating

Credit score is used by lenders to determine your creditworthiness. It plays a key role in their decision to approve or deny your mortgage application. Your credit rating is based on your credit history, that is, your debts and your ability to repay them. This information is found in your credit report, which outlines open accounts, repayment history, total debt levels, and any bankruptcy or collection issues. Maintaining a good credit history will give you credibility, which will affect your ability to get a loan. In Canada, you can get your credit score from both credit reporting agencies, Equifax and Transunion .. If your credit score is low (eg less than 650), you will likely have difficulty obtaining a traditional mortgage. You might get rejected outright, be approved but for less or with a higher interest rate, be required to make a larger down payment, or be asked to find a suitable co-signer for the mortgage. It is also recommended that you regularly monitor your credit report to ensure that it is up to date and does not contain incorrect information. We can offer you helpful tips to improve your credit rating before your mortgage is approved.

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