Before you even consider checking out real estates and buying the house of your dreams, the first step is to get pre-approved, so that you wouldn’t encounter any glitch in your home-buying process. Otherwise, you will have to deal with disappointments, rejection and may probably lose money too. In case you are wondering what the ideal time to get pre-approved is; I would suggest 6-9 months before you start checking out houses. There are numerous reasons why you need to get pre-approved early, and you are about to find out some of them in this post. Stay along!
RAISE YOUR DOWN PAYMENT
If you take your time to go through the pre-approval stage, you will have enough time to save and plan towards your mortgage application. The Canadian government offers a program that is aimed at assisting first-time homebuyers. However, this program requires a 90-days duration to maturity. The advantage of this program is that it can help improve your down payment by up to 40% and on the bright side, this could even help you raise your home budget, because of the extra money you will be getting via the program.
Check out this illustration:
|DOWN PAYMENT||EXTRA DOWN PAYMENT||MAXIMUM HOME VALUE|
This example represented in the table above is just a simple illustration to show how extra funds could increase your down payment and invariably raise the maximum value of the home you can buy. The beauty of this program is that the extra cash you earn can be diverted into anything you want. You may channel it into home customization or renovation, and you can use it in raising the maximum home value you can purchase as illustrated above.
RENOVATE AND CUSTOMIZE YOUR HOME
Have you fallen in love with a property at first glance, only to walk in and find the kitchen in a terrible state? No worries, you can still buy the house and renovate it to your taste. This is what pre-approval helps you achieve because it gives you a wealth of buying options. There is a unique program here in Canada that can help potential homebuyers add up to $40,000 to their mortgage which can then be used in the renovation of the terrible kitchen, old living room and lots more. However, benefitting from this program doesn’t come on a platter of gold; instead, you will need to make the right offer, get the right contractors, and secure a few quotes from, to satisfy the bank’s requirements. Now, you see more reasons why pre-approval is excellent!
GET A LOWER RATE
Do you know that you can take advantage of the lower rates we have now against a future mortgage application? Yes, you can! This is the act of locking in your interest rate so that you can enjoy automatic protection against any future interest rate spike. It is a win-win situation because even in the events of rate drop, you will still be qualified for the lowest rates.
LEARN ABOUT THE CLOSING COSTS
To close your mortgage requires payments, and a pre-approval stage will help you learn about the various closing costs associated with different lenders. Once you learn this early, you can get your mortgage from the lender that offers the lowest closing costs possible.
- WHAT ARE CLOSING COSTS
To close your mortgage requires some closing costs such as legal fees, property taxes, land transfer taxes. Many lenders will ask you to prove that you have up to 1.5% of the value of your potential home in savings, to ensure that you can afford the closing costs when the time is right to close your mortgage.
THE DO’S AND DON’Ts OF MORTGAGE APPLICATION
You will only learn about the do’s and don’ts of mortgage application when you go through the pre-approval stage. Without the pre-approval stage, you might violate some of your mortgage application’s terms and conditions. However, with the pre-approval stage, you will learn all the do’s and don’ts necessary before buying your home.
- Don’t purchase a new car/vehicle before purchasing your home
(From experience, people don’t get pre-approved when they buy a new car before buying their home).
The reasoning behind this is that a new car will warrant a new monthly payment, which will have a significant impact on the maximum value of the home you can purchase.
(A good credit score will ensure that you get pre-approved).
Make sure your credit report is updated, precise, and accurate, and above all, free from all forms of errors.
Check below for some common mistakes that many homebuyers make:
- Misspelled names or aliases which might confuse.
- Debts records that are not updated
- Multiple credit history for the same records
From experience, these mistakes and many other similar ones are not readily fixed in a short while. So, if you noticed an error in your credit report that requires fixing, you should make plans to rectify the errors for at least 3months, and then wait for another 3months to be sure that the changes have taken effect. This implies that you should check through and rectify your credit report for a good 6months before you go about shopping for a home.