The first step to many when looking for a property is to go to their Bank or BROKER, and ask for a pre-approval. A pre-approval lets the buyer know how much he or she would be approved for by a Bank or lender based on their income. I truly believe that obtaining a pre-approval is the best and first step in the mortgage process; I think most do not understand exactly what a pre-approval means, and does for the client.

First thing’s first, a pre-approval is not an approval, it’s not a guarantee of financing, and unfortunately it’s not binding. Many factors can negate the pre-approval, and make it VOID/

• Property does not fit the parameters of the Bank of Lenders requirements
• Change in employment from when the pre-approval was completed.
• A change in your credit report from the time you received a pre-approval
• Change in mortgage lending rules.

Simply put, a pre-approval allows the client to know how much they’d be approved for at the time the pre-approval was completed, and gives them a better understanding of their purchase options. The pre-approval highlights anything that needs to be fixed before making an offer, and makes sure you have all of the right income documentation ready for when it comes time to make an offer.

Another perk is that a preapproval allows you to hold a rate up to 90-120 days. This protects the buyer from an increase in rates, which they tend to do from time to time. But the beauty thing is, if rates drop, well you still have access to them. A pre-approval does not mean that you have to stay with that lender; it just protects you from an increase in interest rates.

During a pre-approval, your Bank or BROKER should collect your income documentation, prepare you for the buying process, secure you a rate hold, and highlight anything that needs to be fixed prior to making an offer.

A pre-approval is the starting point of anyone looking to purchase a property, but be forewarned, and know exactly what your pre-approval really does for you.

All the best,

-D