Thursday, April 28, 2011

Mortgage Pre-approval

A mortgage pre-approval is the very first step in buying a home. It is also the most important step; it can save you thousands of dollars if you chose the right broker. This is the point where you find out how much purchasing power you have and what it will actually cost you to buy a home. If you decide you want to do this at a bank make it absolutely certain that you receive a pre-approval certificate. Often banks only do a pre-qualification which can cause you a lot of headaches if they are not thorough enough. (Pre-qualification does not include a credit check.)

With a pre-approval certificate it is almost like buying with cash and can give you more bargaining power because your Realtor may present it during an offer presentation to show your ability to purchase the home. Even more so if it is from a reputable mortgage broker such as Butler Mortgages.

First Time Home Buyers

For first timers you want to be certain your broker is really taking the time to explain the process, if you do this in person you want to make sure you are able to spend at least an hour with your broker. It really only takes 10 minutes to do the application, but your broker should take the time to explain the process in detail and answer all your questions.

Buying and Selling, Upgrading?

It is just as important to get a pre-approval in this case. Imagine if you sold your home and went and put in an offer on another home and your lender has told you there is a problem with your credit. Now what? Basically you are screwed!!! Your credit could be damaged from something you had nothing to do with, you could have a common name and something was accidently put on your bureau that should have gone on someone else’s. Creditors do make mistakes and quite often. We are known to save deals like this if you are currently experiencing this problem.

The Pre-approval Advantage

When you find a home and put in an offer, you usually have 5 business days to secure your financing. That does not give you a lot of time to shop around and decide which type of mortgage you want. If you are pre-approved ahead of time, you have already secured the best financing with the terms you want. Remember one lender may have the best fixed rate but their variable may not be that good. So a broker will find which lender suites your needs and offers the best terms for you. Keep in mind if you have a pre-approval, the 5 business days to secure financing is usually to secure financing against the home, the property is being approved not you. However, if your down payment is less than 20% and you need default insurance. CMHC and Genworth (mortgage default insurers) do not do pre-approvals, only the lenders do. This is another reason you make your offer conditional on financing especially if your credit is fairly new or a little rough.

Finding a Realtor

Once you have your pre-approval it is time to find your Realtor. If you do not have a Realtor we can definitely help you find one or refer one to you. It is a good idea to use one who is very familiar with the area you are planning to move to. Also the type of property you are looking at buying. Some Realtors concentrate on condos and know everything about them; others are more into the single family homes or investment properties. Maybe you want a farm? You may not want to use a condo Realtor for a farm purchase. The knowledge of a Realtor in a specific area and/or type of property can be a huge benefit to you.

Basically a pre-approval by a good broker gives you the edge as well as knowledge. Knowledge gives you confidence and piece of mind. If you would like to recieve a pre-approval certificate or need help finding a Realtor, feel confident in calling us.

You can fill out the application online by clicking here and request it be sent to me by selecting my name at the bottom of the application. Still, it is best to come into one of our offices and discuss it further.

Ron Miller
Butler Mortgages

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