Mortgage Pre-Approval: Why It Matters When Buying a Home

Getting a mortgage pre-approval before you start seriously shopping for a home can make the buying process much easier. It can help you understand how much you may be able to borrow, estimate your mortgage payments and focus your search on homes that fit your budget.

However, a pre-approval isn’t a guarantee of final mortgage approval. Your lender will still need to approve your financing and the property you eventually choose.

1. Mortgage Pre-Approval Helps Define Your Budget

One of the biggest benefits of getting pre-approved is having a clearer idea of what you may be able to afford.

Your lender or mortgage broker will review information such as your income, assets and debts to estimate how much they may be willing to lend you.

As a result, you can begin your home search with a more realistic price range.

2. Focus Your Home Search

Once you understand your potential budget, you can spend more time looking at homes that make financial sense.

Instead of falling in love with properties outside your range, you and your real estate agent can focus on neighbourhoods and property types that better fit your financing.

3. How Mortgage Pre-Approval Helps When Making an Offer

Finding the right property can sometimes happen quickly. Therefore, having your financing organized beforehand can make the offer process smoother.

A pre-approval doesn’t eliminate the need for a financing condition when one is appropriate. However, it means you’ve already completed an important part of the mortgage process before finding the home.

4. Mortgage Pre-Approval May Include a Rate Hold

Depending on the lender, a mortgage pre-approval may include an interest rate hold for a set period.

This can provide some protection if rates increase while you’re searching for a home. However, rate-hold periods and conditions vary between lenders, so ask exactly how your pre-approval works.

5. Identify Financing Issues Early

The pre-approval process may also uncover issues that could affect your ability to qualify for the mortgage you want.

For example, your income, existing debts, credit history or available down payment may affect how much you can borrow. Identifying these issues early gives you more information before you begin making offers.

Getting a Mortgage Pre-Approval Before You Buy

A mortgage pre-approval is an important early step, but your maximum approved amount doesn’t necessarily equal what you should spend.

Remember to consider property taxes, strata fees, insurance, closing costs, maintenance and your other monthly expenses when setting your budget.

If you’re planning to buy in New Westminster, Burnaby, Coquitlam or elsewhere in Metro Vancouver, the Adam Lloyd Home Selling Team can help you understand the buying process and narrow your search based on your needs and budget.

Contact The Adam Lloyd Home Selling Team, we can help you understand what’s currently available, where the best value is and how to compete in this price range. Reach out anytime for a no-pressure conversation.

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