Mortgage Information

Qualifying for a mortgage

Your Royal LePage agent can arrange to have you pre-qualified for a mortgage before you start shopping for a home. It’s easy, and you’ll avoid possible disappointments down the road if you fall in love with a place, then find out you can’t afford it. Plus, once you do find the perfect home, it will mean you can make an offer immediately.

Here’s how mortgage approval works: the amount of money you qualify for, plus the amount of cash you can put down equals the amount you can afford to spend on a home. Most lending institutions won’t allow more than about 30% of your income to support a mortgage. If you have other debts, they usually won’t allow your debts and your mortgage to exceed 40% of your income.

How a pre-approved mortgage can help you

Whether youre planning the purchase of your first or fourteenth home, it pays to obtain a mortgage prequalification certificate (better known as a pre-approved mortgage) from the lender of your choice. Not only does this step provide peace of mind, but it also helps your offer stand out from the pack in a multiple-bid situation.

A reality check

Your bank or mortgage lender will examine your current financial situation to determine how much you can afford to borrow and give you a realistic idea of what your monthly payments would be.
Some people avoid pre-approvals because they feel they know how much house they can afford or that the money fairy will suddenly appear when they find the property of their dreams. Not having a pre-approved mortgage often leads to unsuccessful bids due to financing falling through, leaving both the buyer and seller in an extremely disappointing situation. In other cases buyers become house rich and cash poorbecause most of their income is spent on housing. Its worth it to take the time, which can be less than an hour or two, to start off on solid financial ground.
With a pre-approved mortgage, you have an amount to have in mind while house hunting. Instead of scrambling to see every open house in the neighborhood, you can focus your search to homes that fit into your predetermined price range. And by comparing similarly priced homes, youll be better able to gauge the value of each property and find the one thats right for you.
Anyone who has experienced buying during a period of double-digit interest rates already knows the wisdom of obtaining a pre-approved mortgage with a locked-in mortgage interest rate. These are usually guaranteed for 90-120 days and, in the event that mortgage interest rates decrease during that period, will be lowered accordingly. Be sure to check this with your lender.
The main reason to lock in your rate is to protect yourself in case rates go up, so be sure to ask about it. For example, on a $100,000 25-year mortgage, an increase of 1% to the rate would add approximately $72 to your monthly payments. Thats over $800 in a year that could have gone towards something a little more fun, like a weekend getaway. Without a pre-approved mortgage, a sudden increase in mortgage interest rates could mean you no longer qualify for your dream home.

It's easy

Whether you decide to use a mortgage consultant, who will negotiate on your behalf to compare rates and terms from several financial institutions, or your preferred bank, the process of getting pre-approved is fairly straightforward. Youll be asked to provide your financial information, including all assets, liabilities and proof of income as well as the amount you have available for a down payment.
After reviewing your financial situation, the lender will determine the maximum mortgage amount you qualify for and lock in a mortgage interest rate. Prequalification certificates normally last for 90-120 days. If you dont buy a home within this timeframe, you may renew your agreement at the going interest rate when your guaranteed rate expires.

A firm offer

Homebuyers with a pre-approved mortgage have the upper hand when they put an offer on the table. And its easy to see why. Having pre-approval demonstrates that youre serious about purchasing a homeyouve done your homework and have arrived prepared. It also officially addresses your ability to finance the purchase, which leaves no question in a sellers mind that yours is a firm offer.
Its great leverage in negotiation or if you find yourself in a bidding war and because you know your limit, you wont place a bid that goes beyond what you can afford.
After your offer is accepted, all thats left for you to do is to send in the property and offer details, along with any other information requested, to your lender and your pre-approved mortgage will be converted into your actual mortgage in a matter of hours.
When it comes to buying a home, theres no better way to approach a purchase than with the confidence and convenience a pre-approved mortgage provides.

Finalizing your mortgage

Once you’ve found the home you want to buy, you’ll need to finalize your financing. You’ll need to provide your lender with the following documents:

1. A copy of the real estate listing of the property. If the home is still to be built, the mortgage lender will need to see the architect’s or builder’s plans and details on lot size and location.
2. A copy of the offer to purchase or the building contract, if this document has been prepared.
3. Documents to confirm employment, income, and source of pre-approval.
4. If you have a pre-approved mortgage, it’s a simple matter of finalizing a few details with your mortgage specialist.