One key step in the home purchase process, especially in competitive markets like some areas of BC, is getting pre-approved for a mortgage. Many of our clients come to us before they’ve even set foot in an open house to determine what they can afford and what their options are. While this might be your first time getting pre-approved for a mortgage, the team at Auxilium is here to make the process straightforward and pain-free. Here are some answers to the most common questions we get asked by clients about pre-approvals, which will help you to understand why pre-approvals are critical and how to get started.
What is a mortgage pre-approval? Do I need to get pre-approved?
A mortgage pre-approval is a qualification for a mortgage for a set amount. It’s primarily calculated based on your income, credit history, debt levels, and employment status. While it’s not the final mortgage approval from a specific lender, pre-approvals can give you an excellent idea of what a final mortgage approval would look like when you’re finally ready to purchase a home.
Getting pre-approved for a mortgage isn’t a requirement before beginning to look for a house in most cases; however we along with real estate professionals strongly recommend it. Why? Because it allows you to have a realistic budget when house hunting, makes the offer process much smoother (which the sellers will likely appreciate too!), plus it shows sellers that you’re a serious buyer when you submit your offer. Overall, getting pre-approved before beginning the house hunting will lead to being able to not only make informed decisions, but also act quickly and decisively when you find the house of your dreams.
How long does getting pre-approved for a home loan take?
As part of the application process, you’ll need to round up critical documents such as identification, paystubs, income tax returns, proof of income, etc. Depending on how prepared you are and the complexity of your financial situation, this could be a matter of a few minutes or a few days.
Once you have your documents in order, you’ll submit your documentation either online directly to a lender or to a mortgage broker. At Auxilium Mortgage, our team will set up an encrypted secure folder for you to upload these documents to. Once you’ve done so, in the case of where you’re dealing directly with the lender, one of their staff will review the paperwork and in the case where you’re dealing with a mortgage broker, he or she will review and discuss your file with potential lenders. This can take as little as one business day for straightforward files and longer for more complex ones. A credit check may or may not form part of the review depending on your situation, so it’s best to confirm if one was done. If you’ve got concerns about the lender and/or broker performing a credit check, it’s best to convey these concerns to them upfront. A credit check allows the broker and/or lender to view your financial history and that, along with the documentation provided, determine what you can afford, and what mortgage options and terms may be available.
Many clients can receive a pre-approval within just a couple of days of providing the required financial documentation. For others though, where documentation is either missing or hard to come by, the final pre-approval can take longer. Keep in mind, experience matters, and working with an award winning mortgage brokerage like Auxilium, can not only potentially speed up the pre-approval process, but equally importantly, secure for you favourable rates and terms with lenders that fit your unique financial situation.
Why is my mortgage pre-approval taking a while?
There are many things that can affect the speed at which you get pre-approved for a mortgage, some of which we can control but some of which are outside of our control.
- The main obstacle to getting pre-approved is often the delay in the submission of documentation, such as pay stubs, bank statements, tax documentation, separation agreements, support payments etc.
- On the lender side, different types of lenders, for example large banks or smaller credit unions, might have different processing speeds. Depending on what type of lender you’re hoping to get pre-approved with, there might be a longer wait based on their internal timing
- Another factor that can affect the timing of your pre-approval could be your credit profile. Complex credit histories and lower scores often require extra time to review and secure potential solutions, however, don’t assume that longer waiting times mean you’ll be declined and not get pre-approved! At Auxilium Mortgage, our award-winning team specializes in helping residents of Vancouver Island with less-than-stellar credit scores get pre-approved.
- Finally, the state of the housing market can also affect wait times. Busier seasons equals more applications and longer turnaround times for pre-approvals and mortgages.
What’s the difference between a mortgage pre-approval and a rate hold?
Another thing to keep in mind when seeking a mortgage pre-approval is the difference between a pre-approval and a rate hold. Whereas a pre-approval involves a thorough review of your entire financial situation, a rate hold simply locks in a specific interest rate without the underlying review, which may or may not be a good thing! This article explains rate holds in more detail and our approach to rate holds at Auxilium.
What can I do once I get pre-approved for a mortgage?
Your pre-approval will have a few numbers, including the maximum mortgage you could be approved for with the selected term (length of mortgage) and approximate rate. In the case of a rate hold, the length of time the interest rate will be held varies, but it’s often between 60 days and 120 days depending on the lender. This allows you ample time to look for a home without having to worry about rising rates in a volatile rate environment.
Why should I work with a mortgage broker to get pre-approved?
While we might be biased, we believe that working with a mortgage broker for your pre-approval makes the process way simpler and stress-free, especially when it’s a brokerage like Auxilium Mortgage. From ensuring you have all the documents you need ready to go before starting your application, helping you find the right lenders for your goals and financial situation, and reviewing your options, we help clients every step of the way from pre-approval to signing their first mortgage and beyond.
Looking to get pre-approved? Contact us today for a no-obligations consultation to hear about how pre-approval works with Auxilium.
1 Comment:
Great breakdown of the pre-approval process—especially helpful for first-time buyers navigating BC’s competitive housing market. One thing I’d add from personal experience is how valuable it is to clarify with your broker whether the pre-approval includes a rate hold, since that can really influence your strategy if rates are fluctuating. Looking forward to more insights like this!