COVID-19, those four syllables we hadn’t heard of a year ago and now dominate our collective vocabulary. The pandemic has affected everything, including the housing market. While Vancouver real estate prices haven’t shifted, sellers will now be more hesitant due to economic upset. So, it’s more important than ever to know what a mortgage preapproval is and why you should get one if you’re considering buying a new home in 2021.
What Is A Mortgage Preapproval?
A mortgage preapproval is a conditional agreement from a lender to loan you the money to buy a property. A preapproval isn’t binding but says they would lend to you barring any unforeseen changes in your financial circumstances.
Why Is A Mortgage Preapproval Important?
The preapproval lets you:
- estimate your mortgage rate
- understand the maximum mortgage you may qualify for
- guarantee an interest rate for 60 to 120 days with certain lenders
In short, a preapproval gives you a sense of what you can afford in a home, means sellers will look on you favourably and advises you of any problems you may have with your loan early on. To get preapproved, your personal details, income and finances will be verified by the prospective lender.
When you decide to buy, it’s easy to jump in and start looking at all the houses out there for sale and presale. Beautiful condos in downtown Vancouver, modern apartments overlooking Burnaby… we understand the excitement better than most. With a preapproval, you have an idea of what you can afford so that you don’t fall in love with a home that’s way out of your price range. With that preapproval letter in your pocket, you can look at homes with confidence rather than uncertainty.
If you do want to start building excitement about your dream home, take a look at the Kin Collection by Beedie Living, one of the most anticipated presale projects in the Lower Mainland.
In the wake of COVID-19, many people are looking to buy, but service providers will be hesitant to take on a risky prospect. Being preapproved lets real estate agents know that putting time and effort into finding you a new home will pay off for them financially. Sellers and presale realtors will take you more seriously if you seek preapproval, as it shows you’ve researched buying a property and know the ins and outs. If they take you more seriously, they’re more likely to trust you to pay off your mortgage. Think turning up for a job interview with everything prepared, references in hand, looking your best, having researched what you’re getting into. You want to look like a serious applicant, not a casual browser.
Check Your Credit Report
Before you request preapproval, get a copy of your credit report and make sure it’s correct. You may have debts you hadn’t considered and have to clear them in order to seek a mortgage. You don’t want to approach lenders until you are clear on your financial situation and can prove it with the correct paperwork.
Research and Consider Multiple Lenders
Before you get your preapproval, consider different lenders. Mortgage brokers have varying levels of experience, guidelines and interest rates. Shop around to find the one who feels right for you. You can even get preapproved by several lenders and then decide on the best one once you choose the right house for sale.
The Process
You have to provide your mortgage broker or lender with:
- ID
- proof of employment (position, length of time in the role, pay)
- statements showing you can afford the down payment and closing costs
- info on any other assets you hold
- info on debts and financial obligations
If you’re self-employed, you will also need Notices of Assessment from the CRA for the past two years.
Debts and financial obligations entails:
- credit card balances and limits, including on store credit cards
- child or spousal support payments
- car loans or leases
- lines of credit
- student loans
- any other loans or formal financial commitments
Remember that a preapproval is conditional. If you have any major changes in circumstances between being preapproved and choosing a house, you may not secure financing. So, if you change job, take out another loan or spend a portion of your savings, the preapproval doesn’t mean you’re guaranteed a loan.
Once you’re preapproved, you can get excited about that dream home and start the search. You’ll know which presale and for sale properties are attainable and which to look past. You’ll be taken seriously as a buyer and once that ideal place comes along, have the grounding to pursue it with confidence.
Thanks for reading. If you’re seriously considering buying a property, take a look our post on the 10 best presales available in 2020. We have presale condos in Vancouver, Coquitlam, Burnaby and all across the Lower Mainland. If you have questions about any of the presale properties on our site, contact one of our realtors directly.
Lynn Le Drew at 604-346-6801 or EMAIL
Colin Gatward at 778-228-3622 or EMAIL
