First-time home buyers often get swept up in all the lingo and requirements on the path to purchasing their first home. The homebuying process includes many steps and countless documents, and can be tricky to navigate. One thing that most home buyers generally understand is that they need a mortgage pre-approval — but there are important things to know about what a mortgage pre-approval really means and what it actually does for you.
We hope that this blog helps to clarify and de-mystify mortgage pre-approvals so you can feel better prepared to enter the home buying market.
What is a mortgage pre-approval?
A mortgage pre-approval is a process that a lender uses to determine the amount of mortgage that you will be able to carry and pay back.
Some lenders suggest that receiving your pre-approval is as easy as a few online clicks, and others will go through a much more formal and thorough process.
At Champion Mortgage, we understand the importance of ensuring that a complete review is conducted in order that you are presented with a realistic picture of your home buying potential.
Champion’s mortgage pre-approval process
When we meet with you, we will take the time to discuss your unique situation, your home buying goals, and your lifestyles needs. Next, we will review key documents to fully craft a vision of your financial means. These documents will include:
- Proof of income- typically via a government-issued Notice of Assessment (NOA) for the prior tax year and/or T4.
- Recent pay stubs.
- A letter from your employer stating your position, length of service, and salary.
- Information outlining any other sources of income.
- Statements for any existing mortgages.
- A credit report.
- A list of any current debts.
- And additional documents as determined based on our conversation.
Once we learn from you what you are looking for in a home, what your down-payment amount will be, and what the numbers from your provided documents show, we will be in a position to provide you with a proper assessment and pre-approval that realistically reflects your situation.
Important Fact: Unlike some lenders, at Champion Mortgage, we will stand behind our pre-approval because we will have gone through a proper review process with you.
While some lenders may pique your interest by suggesting that with a few clicks of your mouse you can receive a pre-approval for hundreds of thousands of dollars, it may not actually be viable — and you don’t want to be left holding the bag for a large mortgage that you cannot actually afford. We know from experience that a thorough review is the way to go.
A mortgage pre-approval is not a guarantee
A common misconception is that a mortgage pre-approval is a guarantee of your ability to receive a mortgage for the amount indicated on the pre-approval — this is not the case.
The pre-approval, detailed as it may be, is simply a document that informs the homebuyer of an amount that they can use as a guideline when beginning to hunt for their home. Generally, at the time of pre-approval, there is no specific house in mind, so the lender cannot assess the property to guarantee anything.
There are many other factors that need to be taken into account before a lender will commit to your mortgage. These factors may include:
- The age of the property.
- The type of property.
- A home appraisal to assess the value of the property.
- Any significant reparations that may be needed on the property.
- Any potential liens (debts) on the property from unpaid mortgage payments to back taxes.
- Any easements or variances on the property.
- And more.
As with anything in life, things change, and often when you least expect. People lose their jobs, face challenging personal events, and go through life changes — you want to make sure that you position yourself as best as you can for your home buying adventure with a proper pre-approval process.
Don’t leave major life decisions, like buying a home, to chance. Contact the expert team at Champion Mortgage and let’s get your mortgage pre-approval started.