The average Canadian homebuyer takes 11 months to plan their purchase, according to CMHC. If you’re thinking about buying in the next year, our four-part series will explain how you should be dividing your time.
Part 2: The Pre-Approval
There is no better tool to help you obtain a true picture of your housing budget than a mortgage preapproval. Unfortunately, less first-time buyers are taking the time to get one.
According to TD Canada Trust’s First Time Homebuyers report, 91% of first-time buyers were pre-approved for a mortgage before house shopping in 2010, and that number fell to 76% in 2011.
There’s no real reason why less homebuyers should be taking advantage of the opportunity to get preapproved for a mortgage especially if you’re dealing with a mortgage broker. With one glance into your credit score, we can use the information to see which lenders are willing to approve you for a mortgage, at what rate and for how much.
While this approval isn’t etched in stone the lender will still want to see proof of income and other personal details upon approval, and if you’re putting less than 20% down, your mortgage insurer (i.e. CMHC or Genworth) will also have a final say it nevertheless gives you a good picture of what type of funds are available to you, and at what rate.
Not only does this help you put a more accurate budget together and ensure your house hunting endeavours fall within your allotted price range but, in many cases, it also allows you to secure the best available rate. Most lenders will hold their best rate for you for 90 days (and sometimes 120 days) upon preapproval. If you don’t find a home within that time (or if you just haven’t had a chance to start looking) you can obtain another preapproval hassle-free.
For the amount of effort it takes to call up your mortgage broker and obtain a preapproval, it’s definitely worth the added convenience. In many cases, we can do the legwork online, and have it turned around within a business day or less.