Pre-Approval. How much your Credit Score affects to you?
Today, In this episode of Pro Tips again with kevin mayor of mortgage broker extraordinary to talk to you about the importance of mortgage pre approval.
What the Pre Approvals means
KEVIN “So pre approval is essentially a professional looking at your paper.Looking at your application to see what you can qualify for. As well as locking in an interest rate for you for a hundred and twenty days which is four months.”
DAVE So talk to us more about that locking interest rate what does that mean?
KEVIN “So locking in an interest rate would be me taking your application packaging up really nicely. Setting it to a bank and the bank committing saying YES you can borrow this amount of money. We’re gonna guarantee you x rate for four months. In that scenario if weights go up over that four month period you’re guaranteed the lower of the weights and if the rates go down we’re always gonna get you the better of the rate. So it’s actually just a protection of that file”
DAVE That’s a win-win. So it protects you in case interest rates change. They could you know they’re predicting that interest rates will likely go up within the next year.
KEVIN “So we’re an environment of constant change. It’s a it’s always more and more important to make sure that you’re getting that pre-approval. If rates go down who cares. You’re gonna get the lower of the rate anyway. It protects you against the rising interest rates.”
Okay yeah okay! So it gives you a budget it gives you more of a concrete. Here’s what you can afford and sure go out and shopping yeah!
What’s your opinion about Online Calculators?
Tell us it what’s the difference between that and just going online and filling out one of their online calculators
KEVIN “So filling out an online calculator or even a mortgage pre-qualification site, it’s very limiting. So you don’t have a physical person on the other end looking at your credit. You don’t have anybody asking you for paperwork.
DAVE I’ll go back to paperwork I want to learn more about that.
KEVIN “So myself I get a little bit more in depth with it and I’m kind of a pain in that sense that. I’m asking for a lot of stuff up front,okay and the reason for that is because we don’t want surprises down the road where somebody says. I’m a salaried individual but then you get their letter of employment and that you find out they’re part-time hourly but they just work as if they’re full-time.
Making sure that you’re fitting within the bank guidelines
So we want to make sure that you’re fitting within the banks. There’s very specific guidelines of what they’re gonna use for qualifying income tax because that’s gonna affect how much you can borrow at the end of the day okay”
DAVE yeah. So that what I heard you say is the difference really is Kevin as a mortgage broker doing a full application. You’re getting the applicant submit all these paperworks for sure. Income confirmation and other things. So that you’re actually had some more tangible. It’s a real firm not firm accrual of has not yet connected to any given property better sure. It’s a more solid approval
KEVIN “and just as some forms thing. so you have somebody with the experience behind. It that’s actually going through that paperwork with their own eyes. So whenever you do a pre-approval CMHC and Genworth which are the two mortgage insurers in canada out of three there’s also Canada Guaranty Mortgage Insurance. They don’t look at any pre-approvals they don’t look at your application. They don’t look at you as a borrower and they don’t look at anything until you have a physical property that you hold on. Okay?
So when you’re in that conditional phase of purchasing a home, that’s when the insurers actually start to look at it. So you need somebody that has an eye for knowing what the insurers are looking for as well”
DAVE: okay and then having that done in advance before you go shopping and I can tell you from the other side from the real estate agent point of view knowing that my client has a mortgage pre-approval not just some whimsical online form thing that I know it’s actually a real approval it gives me the confidence to go shopping with them and it puts us in on a stronger foundation in our negotiating you know like we have a stronger negotiating position
yeah knowing that we’re free approves that’s all very good
All Banks are the same?
I want to return to something else you said about the banks and feeling there’s very specific requirements so are all are they all the same there?
KEVIN ” it depends if you’re trying to follow CMHC and generous guidelines they’re pretty cut-and-dry if you have less than 20% down but for what they’re using in terms of paperwork for their calculating your debts or your income. If you get into 20% down or more there’s some more flexibility around that. Because you’re getting outside of that ensure guidelines books sometimes”
First Step if you are thinking about buying a home
So what would someone want to do like what would be the first step if there’s thinking about buying a home and they want to get a mortgage pre-approval where would they go
KEVIN “Usually I just set up a really quick about 15 minute call get to know them a little bit and send them a big old pile of homework that we can start working on.
DAVE okay but again all the benefits are there right you get a mortgage pre-approval you get your lit rate locked in
KEVIN “yeah and makes it easier down the road – and you have that conditional offer out there I have most of the paperwork some of it needs some refreshing like letters maybe stubs but for the most part I have everything else so it makes it a lot less stressful when you’re trying to get better inspections and all that other stuff that”
DAVE “great what they’ve done and they’re gonna need it to produce it later if they hadn’t already at some point so why not do it in advance right
Well awesome Kevin I so I’m sure you’d love to hear from our viewers so if you are interested in mortgage pre-approval check out Kevin Mayer contact information
Yeah thanks Kevin awesome all right and until next time
I’m Dave Robertson your real estate professional for life