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Buying a home is exciting, but before you start attending open houses and making offers, it's important to understand what you can afford. That's where a mortgage pre-approval comes in.
We met with Korina Buchanan, Retails Sales Manager for Cambrian Credit Union, to get a handle on what a mortgage pre-approval is and why it’s a good idea to get one.
During the pre-approval process, a lender, like Cambrian, reviews your financial information and credit history to determine how much you may be eligible to borrow. You'll receive a pre-approved mortgage amount, giving you a clear budget for your home search.
Although pre-approval isn’t essential per se, it’s highly recommended and the route most homebuyers go.
“It’s important to know how much you can afford so that you can look for the right home,” says Korina. “Working out how much of a down payment you can make is a good indicator of affordability.”
At Cambrian, getting a mortgage pre-approval allows you to lock in an interest rate for 120 days while you continue your home search.
Also included with pre-approvals is a letter to indicate the pre-approval amount. Realtors love to include this letter with the offer so sellers understand the buyer is ready to make the purchase. In addition, pre-approvals help you move more quickly when you find a home you love, since a good chunk of the mortgage qualification work has already been completed!
Remember: although pre-approvals are highly helpful and beneficial, they do not constitute final mortgage approval. You would still be subject to final property and qualification review.
As a Cambrian member, the first step to getting pre-approved is to book a meeting with one of our Personal Banking Advisors. At your meeting, your advisor will walk you through the pre-approval process step by step.
You will be asked to provide personal information and documents, like paystubs and investment statements, to identify your net worth, and the advisor will also run a credit check. Based on this information, your advisor will determine the maximum mortgage amount you may qualify for.
With a mortgage pre-approval in hand, you'll have a better understanding of your budget and be ready to confidently begin your home search and make offers on homes within your price range.
While it's helpful to know the maximum amount you qualify for, that doesn't necessarily mean you should spend it all. Leaving room in your budget can help you manage unexpected expenses and maintain financial flexibility after you move in.
“You won’t want to take every penny from your savings for a down payment, because you never know what could come up,” says Korina. “You always want to have savings leftover for unexpected costs, like emergencies and renovations.”
If you’re purchasing your first home, keep in mind there will be several house-related purchases you’ll need to make when you move in. Cleaning supplies, kitchen essentials, and outdoor tools (lawnmower, hose, rake, snow shovel, etc.) may seem like relatively small purchases, but they add up. Saving some room in your budget for these expenses is a good idea.
Buying a home is a major milestone, and we want to be part of your journey!
Book a meeting today with one of our Personal Banking Advisors to start the pre-approval process. An advisor can also discuss affordability, budgeting, and home ownership costs beyond just qualifying for a mortgage!
We would be happy to discuss your unique situation with you.
Our goal is to make complex topics like this one, simple.
