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How to be Pre-Approved for Early Mortgages

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Being pre-approved for a mortgage is the first step in the home buying process, and you should be doing it before even looking at houses. By waiting till the last minute to apply for a mortgage, you can be faced with serious problems, embarrassing situations, and potential financial loss.

The ideal time to be pre-approved for a mortgage is about 6 to 10 months before you’re planning on buying your new home. It can take that long to get your finances and credit in order.

I have compiled this list to show you the reasons to get pre-approved early:

Increase Your Down Payment

Obviously, the more time you have prior to being pre-approved the more you are going to be able to save, but there is also a particular program that the government offers for first-time homebuyers that require 90 days to take advantage of it.

It can increase your down payment by up to 30 – 40% and in turn, this could add $200,000 to the value of the home you could buy.

Down Payment

Extra Down Payment

Maximum Home Value

$25,000.00

$0.00

$500,000.00

$25,000.00

$10,000.00

$700,000.00

This is a very simple calculation which shows using the extra funds strictly to increase your down payment and to maximize the value of the house you are purchasing.

This extra money can be used for anything, including closing costs, repairs, furniture, blinds updating a bathroom, or the kitchen.

How you use this money is entirely up to you, but if you waited until the last minute to be pre-approved this option is not even on the table! There is no way to speed up this process and without taking advantage of it, you could be losing out on money that could go back into your new home!!

Renovate and Customize Your Home

Being Pre Approved early can expand your home buying options dramatically. Did you find a home in the perfect neighborhood, on the perfect street, but the kitchen is dated, and still has that old shag carpeting?

By starting the pre-approval process early on, this is no longer an issue! In fact, this is an opportunity to add value to your new home!

There is a unique program that can help you add up to $40,000.00 in renovations to the mortgage of a newly purchased property.

You can use this money to give your new home a complete makeover, paint that an ugly coloured room, decorate the living room, update the kitchens and bathrooms.

That house that everyone else is walking through and saying “NO,” you can walk through and say “YES.” You even be able to use the cosmetic flaws to negotiate a good deal, as you have this secret in your back pocket.

We see clients updating kitchens and bathrooms and not only getting a house they can be proud of but also boosting their net worth with the additional value of the improvements. If the house you are looking is already beautiful with nothing to fix, you can take the extra money and add your personality to it.

Taking advantage of this program takes time prior to making an offer, because you need to line up the right contractors, and get a few quotes from in order to satisfy the bank’s requirements.

So again, getting Pre Approved early is important!

Secure a Lower Rate

By getting Pre Approved early, you lock in your interest rate and get automatic protection from rising rates while you are looking for your new home.

The best part is, that if the rate drops while you are house shopping, you will qualify for the lowest rate. This is a win-win and not to be missed out on!

Learn the Necessary Closing Costs

Your down payment is crucial to your mortgage approval. You need to have enough money to satisfy the bank’s requirements and you also need enough to pay for closing costs.

What and How Much are Closing Costs?

Closing costs include legal fees, land transfer tax, and property taxes. Most banks require you to prove that you have at least 1.5% of the value of your home in savings on top of your down payment to prove you can afford to pay the closing costs.

This could mean a lot of money that you didn’t plan for! For example, you are looking to buy a $300,000.00 home and have saved $15,000.00 for the down payment. Now at the last minute, you realize you to come up with another $4,500.00 just to pay closing costs!

Don’t be embarrassed if this is the case. These extra expenses are a surprise to many first time home buyers. The worst part is that many people find out that 1.5% isn’t nearly enough, and you could be sent scrambling at the last minute looking for a few thousand dollars to bridge the gap.

Getting a breakdown of local down payment requirements in your region from a CVMP is important to get early and avoids the shock, surprise, and potential embarrassment of dealing with this problem right before closing.

The Do's and Don'ts Before Applying For A Mortgage

The Pre Approval process also gives you a list of do’s and don’ts to avoid complicating your mortgage application. There are many things that you need to avoid doing just before buying a home.

One “don’t” that I’ve seen multiple times that leads to people not getting Pre-approved is purchasing a new vehicle just before the purchase of a home.

For the most part, a house will not affect your ability to purchase a car, but a new car with a new monthly payment can have an enormous impact on the value of the house you can buy.

In Almost All Situations Its Best To Purchase A House First.

There are quite a few of these little nuances that you need to learn and understand, and they are best taught early on, by a mortgage broker you can trust.

Credit, Credit, Credit

Making sure your credit score is accurate, up-to-date, and free from errors may be the single most valuable part of being Pre Approved early.

Nearly 1 in 5 Canadians have an unknown error on the credit report, according to the Consumers Union. It is stated that a large portion of these mistakes WILL affect an individual’s ability to qualify for a mortgage.

The unfortunate part is that many Credit bureau mistakes are rarely your fault since the fixable errors usually have nothing to do with missed or late payments.

Here is a list of the common mistakes / errors we find:

  • Missed spelled names which the credit bureau agencies call aliases
  • Debts that have been closed, that are still showing on the Credit Bureau with an outstanding balance.
  • Credit that you have that is not even appearing on your bureau, this is bad because you aren’t getting the “credit” you deserve.
  • Multiple credit profiles

Without the correct experience, these errors are also tough to fix in any timely fashion.

So if you do have a mistake on your credit report that needs to be fixed, you should plan to have at least 2 to 3 months just to fix it, and then potentially another three to four months for your credit score to reflect that change. Therefore, you need to check your credit score a good 6 months before home shopping.

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