A Beginner’s Guide to Getting a Mortgage Pre-Approval
If you’re planning on moving into a beautiful new home, then working with a mortgage broker (instead of a bank employee) will ensure that you can receive the most up to date and unbiased information.
A mortgage broker has the expertise to help you make the most significant purchase of your life. However, to achieve a mortgage, a pre-approval is first needed, which is a process unfamiliar to most home seekers.
So, to guide you step by step towards getting pre-approved, Laurie Boudreau- Mortgage Specialist, has put together a beginner’s guide to getting a mortgage pre-approval. Through this guide, you will feel confident about going on to secure a mortgage.
Don’t quit your job: A BIG indication of financial stability is how long you have been at your job. Most lenders require that you have been at your job for at least one year. Being on probation is often a deal-breaker, so it’s best to change careers AFTER you move into your dream home.
Calculate net worth: You will need to take stock of your financial situation by identifying your financial strengths and weaknesses.
How do I do this?
Start by writing down all your assets, including cash in the bank, RRSPs, TFSAs, and offers of a gifted down payment. Also, take note of your vehicle’s current value. Add these assets up. Let’s say they total $25,000.
Then add up your liabilities by determining how much you owe for your vehicle, credit cards, and student loans. Let’s pretend they total $20,000. Your assets minus your liabilities equals your net worth.
A positive number means you have a positive net worth. In this example, $5000. Lenders usually only give mortgages to people who have a positive net worth as they appear financially responsible. If you have a negative net worth, you need to get rid of some debt and increase your assets.
Check credit score: To be pre-approved for a mortgage, you also need to prove that you have good credit, and the higher your credit score is, the lower your interest rate will be. So before applying for a mortgage pre-approval, you should check that your Credit Karma and Borrowell credit profiles have no collections or other negative information reporting. If there is something adverse, then an experienced mortgage broker can try to help get this fixed before applying for a mortgage pre-approval.
Increase credit score: To increase your credit score, make sure every credit card balance is no more than half of the available limit. For example, if your credit card limit is $5000, make sure your balance owing never exceeds $2500. Consistently doing this every month will help your credit score increase.
Save for a down payment: Start saving as much as you can for your down payment and closing costs by living frugally and selling off unwanted items like old vehicles, furniture, designer clothing, jewelry. Deposit this cash (and any money you have at home) in your bank account.
If a relative has offered to give you a financial gift for your down payment, ask them for it ahead of time. If they are reluctant, try promising that the money will specifically get used for buying a house, and if they still won’t budge then offer to open a joint savings account to hold the money.
Advice From The Pros
Listen carefully: Here is a tip only a few mortgage experts know (shhh) a cash gift that has been in your bank account for over three months is considered to be your own saved down payment. Lenders consider a ‘saved down payment’ a stronger source of a down payment than a gifted one. Why does this matter? If your mortgage pre-approval application is weak in some areas and you can show you have a saved down payment then the lender might say YES instead of NO.
QUICK question: Should you buy a new vehicle before or after you purchase a home? And does this make a difference? Before you compare this to the chicken and egg concept, know this, it is ten times easier to qualify for a vehicle loan. SO keep the old clunker UNTIL after you move into your new home. Droves (no pun intended) of mortgage seekers get declined as their expensive new vehicle’s $400 biweekly payment has kiboshed their homeownership dream for the next five years.
Don’t sweat it: Getting approved for a mortgage involves many steps and much financial scrutiny. An experienced mortgage broker like myself has seen it all. There is no need to be embarrassed by a missed payment or even a previous bankruptcy (Remember, bad things also happen to good people).
There is no dumb question: Most of us have expert knowledge in our work field, so don’t feel embarrassed about asking a mortgage or credit-related question, AND don’t believe everything you read on the internet.
Finally, enjoy the process. Yes, buying your first home will be nerve-wracking, but also one of the most exciting times of your life.
At Laurie Boudreau- Mortgage Specialist, my goal is to exceed your expectations. As the go-to expert in Winnipeg, Manitoba, for all your mortgage needs, you can feel confident about securing a mortgage pre-approval with me.
I specialize in first time home buyer mortgages, reverse mortgages, private mortgages, second mortgages, and refinancing. I also help clients that have already been turned down by a bank.
I serve clients across Winnipeg, Oakbank, Stonewall, Portage La Prairie, Selkirk, and the surrounding areas.
Visit my website to learn more or contact Laurie Boudreau- Mortgage Specialist today.