Mortgage Pre-approval Process And It’s Significance
At some point in life, all of us would be finding ways to secure our dream home, for which, availing a suitable mortgage is indisputably essential. Although you might be drawing a six-figure salary in a year, buying a home would definitely require some financial backing, as the cost involved is huge and could not be accomplished, unless and until you have a wealthy background if not planning for a property mortgage. When you have realized that the mortgage is your ultimate way of sourcing the required money to seal in your dream property or the dream home, what you need to understand is the different steps that are followed in a mortgage process.
Especially, if you are a resident of the Canada or planning to buy a house there in the future, then, among the followed procedures to secure a property mortgage, the pre-approval process is evidently significant, as it ensures your feasibility of availing the mortgage, considerably.
What is a pre-approval process?
The pre-approval is an important step in the mortgage process, in where your lender produces you the actual loan amount that you would be eligible for availing, after carefully perusing your income and credit information. This step is important because, you would actually be receiving a written statement that explains your possible loan amount eligibility, with which you can plan your further crucial steps of securing your desired property.
How is it different from pre-qualification?
Many confuse the pre-approval process, with that of the pre-qualification process or sometimes, even few of them feel when the pre-qualification step is cleared, then, no need to care about the pre-approval step. But, that is not the case truly. A pre-qualification process would not state the actual loan amount or even the near-actual loan amount that you would be eligible to avail from the particular financial institution, as most of these concerns would just check your basic documents and provide a would-be-quote, without checking your credit information.
Or, in simple terms, pre-qualification is a procedure in where the bank provides you with a loan estimation that you ‘might’ be eligible for but, whereas in the pre-approval process, the bank possibly provides you with the actual estimate, which is true in most of the cases avoiding the few exceptions, as they carefully perform the credit check on you that gives them the fair idea about your repayment capability and hence, easily helps them to decide their ‘opinion’ about your loan amount eligibility.
Why is pre-approval step important?
Increased chances of buying your dream home
When you have the pre-approved mortgage letter or the offer from the concerned financial institution, then it would improve your chance of securing your dream home or the dream property, because this shows, how serious you are to finalize the deal sooner. The real estate dealer would obviously look you as the prospective buyer and happily speeds up the further process, encouraged by your interest and seriousness, which shows adequately in your sensible decision of availing a pre-approved financial backing.
Prepare yourself financially
As the pre-approval process provides you with the actual loan amount that you would be eligible for, you could decipher how much you are short of the required amount and decide your financial moves accordingly to secure your ideal property. In other words, you would be knowing the actual ‘down payment’ that is expected of you when you get to know the amount of money the financial institution would be backing you with for facilitating your property deal.
No room for despondency
A wise buyer would always approach the chosen financial institution to avail the pre-approved loan offer and then approach his/her favorite property dealer to avoid possible disappointments. This is because, when you do not understand your financial position and yet, start hunting for your favorite home or property and even spot your ideal choice and near-secure it with the real estate dealer and later, when you get to know your financial position that is not suitable for securing that property, then the despondency that hits you will be quite consequential. Hence, it is always judicious to know your chance of availing a fair loan compensation, which you can clearly get to know in the mortgage pre-approval process and then accordingly decide the properties that are available in that specific price range so that you won’t be discouraged in your prospective property hunt.
Thus, getting a pre-approved mortgage offer would save you from a lot many complications and embarrassments that might dwindle your spirit of finding your dream home. Also, most of the financial institutions does screening your background check aka the credit check at no cost, and hence you need not worry about the fee involved and, at the same time, you could understand where you stand in the most-wanted credit score, which is required for availing any financial backing, leave alone the property mortgage.