Mortgage Pre Approval
By on Jul 28, 2008
A pre-approval might be best defined as your license to go house shopping. In essence there's no sense in finding the home of your dreams if you're not already 110% sure you can afford if comfortably. There's also no sense in spending your valuable time viewing homes that are not within your price range comfort zone. The worst thing that could happen is you realize that the homes you were looking at will stretch your wallet too thin, and then when you try moving down to the tier below, it's a decline you're not willing to make.
A pre-approval also locks in the interest rate at the time, for you, for a period of a few months. If you don't end up purchasing until three months into the future when interest rates have gone up, your pre-approval guarantees you that original, lower interest rate. On the other hand if the interest rate goes down your lender will simply give you the new low rate on your mortgage.
Another reason it's important to have your mortgage pre-approval in order prior to going house hunting is so that you can take advantage of your readiness should the opportunity to do so arise. In today's market the hottest properties often attract competing offers. On many occasions I've seen vendors accept lower offers because they aren't encumbered by a financing condition, giving the buyer an out, and making the offer less than firm. This in another way your pre-approval can save you a nice bundle of your hard earned money.
Most people have a budget which they've put together and verified for everything from vacations to the cars they buy. It only makes sense that a proper budget, or a mortgage pre-approval, be carried out adequately before beginning the single most important and largest purchase you are likely to make. Perhaps the most important reason to plan ahead, by sorting out your finances in advance, is not simply the money you can save because of it, but all that mental anguish and stress you save yourself from.
Amit Paul is a realtor, owner and partner with two Toronto real estate firms. He can always be reached at ap.1@rogers.com.
