5 Essential Steps to Get Pre-Approved for a Mortgage
So, You’ve Decided to Buy a Home: Here’s Why Mortgage Pre-Approval is Essential
The first thing many people do when deciding to buy a home is rush to Realtor.ca to browse the latest listings. Then, they spend their weekends checking out open houses and falling in love with what seems like the perfect home. After all that excitement, they put in an offer only to discover they can't secure a mortgage for the property.
Mortgage Pre-Approval: Your First Step to Buying a Home
Before attending open houses or scrolling through listings, your home buying journey needs to start in a mortgage professional’s office, not at an open house. I’ve had clients in the past confidently say, “I make $xxx, I can afford this house.” Unfortunately, many were wrong. Whether you’re a first-time homebuyer or purchasing your tenth property, getting pre-approved for a mortgage should always be your first step.
Here are the 5 essential things you’ll need to secure mortgage pre-approval:
1. Proof of Income You’ll need to provide documentation of your income, including statements from your two most recent years of tax returns and recent pay stubs. These should show your year-to-date income. Other sources, such as bonuses or alimony, can also be factored in.
2. Proof of Assets
Lenders will ask for bank statements and investment account statements to verify that you have enough funds for a down payment and closing costs. Down payments typically range from 10% to 20%, depending on the loan type. If you’re receiving financial assistance from someone, you’ll need to provide a gift letter.
3. Good Credit
Your credit score has a significant impact on the mortgage rates you’ll be offered. Lenders provide the lowest interest rates to borrowers with excellent credit. If your credit score isn’t high enough, you might need to make a larger down payment or accept a higher interest rate.
4. Employment Verification
Lenders will want to see pay stubs and will contact your employer to confirm that you have a stable job and income. If you’ve changed jobs recently, they may contact previous employers as well. Self-employed buyers should be prepared to provide additional paperwork to verify their business and income.
5. Documentation
Lastly, you’ll need to provide personal documentation such as your driver’s license, social insurance number, and your signature so the lender can pull a credit report and complete the pre-approval process.
Getting pre-approved might seem like a lot of paperwork, but it’s essential for ensuring you can afford the largest investment of your life. By starting with mortgage pre-approval, you’ll save time, avoid disappointment, and be in a stronger position when making an offer.
Ready to get started on your journey to homeownership? Contact us today at Canadian Dream Realty Inc. Brokerage to connect with trusted mortgage professionals and begin your pre-approval process. We’ll guide you every step of the way to find and finance your dream home.