Mar 19, 2020

mortgage documents

If you’re even casually thinking about buying a home in the next few months, you’d be smart to get pre-approved for a mortgage now.

Toronto’s housing market is red hot, with homes selling in days and sometimes hours.

With too few homes on the market there are often multiple offers.

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  • 6 tips for first-time home buyers with bad credit

Anything that allows you to move quickly, make your offer stand out and appear attractive to sellers is a bonus.

Plus, with two recent drops in interest rates, locking in at the new lower rates protects you should rates rise again.

So here are a few reasons it’s smart to get pre-approved for a mortgage.

  1.  Know how much you can afford

    When you get pre-approval for a mortgage you will find out the maximum amount you can borrow. This helps you narrow your housing search to only those homes within your budget. It will also determine how much your monthly or bi-weekly payments would be.

  2.  Make your offer more attractive

    When buyers are bidding on a home, often their offers come with conditions. Sometimes the condition is that the buyers must also be able to sell their own home. Often the condition is that the buyers will ultimately be approved for a mortgage. If you can present your offer without the condition of needing to secure a mortgage, then that is attractive to a seller. It makes you a less risky buyer for them. Buyers want to eliminate any factors that could derail a deal.
    A man and woman sit at a table looking over documents.

  3.  See red flags ahead of time

    Forewarned is forearmed. It’s better to find out sooner rather than later that there may be some issues with your credit rating or your ability to pass a mortgage stress test that could complicate securing a mortgage. No one wants to find their dream home, put a bid on it, only to find out they can’t really afford it. If you know there’s something in your application that might stand in the way for mortgage approval, you may have time to correct that. This may involve consolidating debt, clearing outstanding balances or even something as simple as making sure your name and address on file with Canada Revenue Agency match what you’ve given the bank. 

  4.  Speed up buying process

    In today’s market, when you find the home you want, you need to be able to move quicklySecuring a mortgage can take time. A delay of even a day or two can cost you the home of your dreams, especially if that house lists on a weekend when banks are closed. If you have your financing already in order, with a mortgage pre-approval certificate in hand, you can be ready to pounce quickly. 
    Gathering the documentation to get a mortgage can also take time, so if you’ve got that out of the way you will be cutting a step out of the buying process.

    A couple fills out forms and signs a deal at a table with another man.

  5.  It’s free

    It doesn’t cost you anything to get a mortgage pre-approval. You’ll need to meet with a bank or certified lender and provide some employment and banking information, but beyond that there’s nothing required of you and no commitment to ultimately get your mortgage from that bank or lender. 

  6.  Signal you’re serious

    Having a mortgage pre-approval in your pocket signals both to realtors and sellers that you are serious. It shows you have done the legwork in advance of viewing homes and you aren’t about to waste your time or theirs by bidding on a house you know you can’t afford. 

  7.  No risk, only benefit

    Mortgage rate pre-approvals lock in one rate for anywhere from 60 to 120 days. If you are pre-approved at one rate and during that time period interest rates increase, you are guaranteed the lower rate. If they drop during that time, you will get the lower rate. In some instances, the mortgage pre-approval rate can be extended, but this depends on the institution. 

Words to the wise 

A pre-approval is not a final approval. If the bank decides that what you’ve offered to pay for the house is more than what it is reasonably worth, it may determine the loan for that property to be too risky.  

If you rack up credit, apply for credit, change jobs or deplete your savings in the time between when you were pre-approved and when you bid on the home, the bank may rescind its pre-approval.  

What you’ll need 

  • Identification 
  • Proof of Income/Employment 
  • Proof of Assets 
  • Bank Statements 
  • Debt Statements 




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