A pre-approval is when a potential mortgage lender looks at your finances to find out the maximum amount they will lend you and what interest rate they will charge you.
With a pre-approval, you can:
The pre-approval amount is the maximum you may get. It does not guarantee that you'll get a mortgage loan for that amount. The approved mortgage amount will depend on the value of your home and the amount of your down payment. It may be a good idea to also look at properties in a lower price range so that you don’t stretch your budget to its limit.
Remember that you’ll also need money for:
Your Credit Bureau
Part of the pre-approval process is a review of your credit bureau. During the application process we will look at your credit history to insure there are no mistakes. We also take the time to explain the information on you credit bureau to you.
If you don’t have a good credit score, the mortgage lender may:
What to provide to your lender to get pre-approved
Before pre-approving you, we will look at your current assets (what you own), your income and your current level of debt.
You’ll need to provide your mortgage broker with the following:
For proof of employment, mortgage broker may ask you to provide:
For proof you can pay the down payment, your mortgage broker may ask you to provide recent financial statements from bank accounts or investments.
Questions to ask your lender or broker when getting pre-approved
When getting pre-approved, ask your broker or lender the following:
Mortgage lenders or brokers will use your financial information to calculate your total monthly housing costs and total debt load to determine what you can afford
Lenders will consider information such as:
Your total monthly housing costs shouldn’t be more than 32% of your gross household income. This percentage is also known as the gross debt service (GDS) ratio.
These housing-related costs include:
Total debt load
Your total debt load shouldn’t be more than 40% of your gross income. This includes your total monthly housing costs plus all of your other debts. This percentage is also known as the total debt service ratio.
Other debts may include the following: