Getting pre-approved for a mortgage seems like a daunting task thing for may people. Your friends are telling you one thing, your realtor is advising you to go another way and then your family is telling you that you must go and speak to a person at the bank they have known for 30 years. And I agree that does sound really daunting!
Enter me and George, the mortgage broker and dog that have one goal in mind – to make buying a house and getting a mortgage as simple and enjoyable as it possibly can be!
What does a mortgage broker do you ask? As a mortgage broker we are neither employees of one particular bank nor are we somebody who charges you a fee for our service, we are the intermediaries between you and the lender that does your mortgage.
Ok, so how do I actually get pre-approved for a mortgage? It is actually really easy, the first step is to book a time to chat over the phone and we will go over all your mortgage goals, what you do for work, where your down payment is coming from, your credit history and any questions you may have.
Why is it important to know those things? Something that is of course very important is one’s ability to be able to pay for the mortgage when you move into the house, this is based on your income, be it from a job you have, a company you own or your retirement income. The down payment is important is lenders want to see that you are savvy with your money and that you can save, which means the risk for them is lower. You can of course get a gift from your parents, grandparents or siblings but having your own savings is extra special! Now I probably don’t need to stress the importance of having a good credit history, that is having paid your bills on time and actually having credit.
So what next? Once we get off the phone I send you an email with the link to fill out your mortgage application along with signing our credit consent form. When you finish the application you will be asked for a list of documents that prove how much money you earn, our portal is secure so don’t worry, your information is very safe! By the way one of the things that separates us from banks is that we actually underwrite your mortgage file up front, so you know that we have all the information the lender is ultimately going to want/need.
Now that you have filled out the application, you have given us your consent to review your credit report and you have given us the necessary employment documents, we can calculate the maximum purchase price you qualify for. This amount is based on your gross monthly income against two debt servicing ratios, the “gross debt service” and “total debt service” ratio. In short, for the GDS portion you have to earn enough money to have the mortgage payment, heat on the property, taxes and condo fee fit within 39% of your gross monthly income. Then for the TDS portion, all of that plus any debts (credit cards, lines of credit, car payments etc) must fit within 44% of your gross monthly income
Cool, and then what do we do? Then we have another phone call where we go into this in more detail and then you have a good idea of how much you can afford. If you have a realtor you are working with we can then chat to them so that they understand the pre-approval and how they should define your search criteria. If you don’t have a realtor yet, please let us know as we know some of the best in the city, George vets them and has a very high standard!
After all this, if you don’t think you are buying right away but you are concerned about the interest rates we can do what is called a rate hold. This is when we say to a lender that we have a client who is hoping to buy in the next 120 days and they will hold a fixed interest rate for you. Now there is a premium to these rates, usually about 0.20% but know that if there is a lower rate at the time we will of course give you the best rate we can.
And there you go, that is how you get pre-approved for a mortgage. As always, please don’t hesitate to reach out to us if you have any questions 🙂