The In's & Out's of a Mortgage Pre-Approval
As a home buyer, when you go shopping for a home, most realtors will ask if you have been pre-approved? What does that mean? And what should you be aware of?
A pre-approval means that a lender (bank, trust company, credit union) has reviewed your income, credit bureau rating, assets, liabilities and down payment and has determined that you ‘qualify’ for a pre-determined mortgage amount. This assists you in determining what house price range you can comfortably afford and, in turn, determines what properties the realtor will show you.
A word of caution… always find out whether your pre-approval is a FULL “pre-approval” or a quick “pre-approval”. What’s the difference?
Many lenders and brokers will say “you are pre-approved, go ahead and buy”. But all they have done is taken a quick application, run a credit bureau, and put together a few numbers to see if you can afford the mortgage payments based on your declared income. This is dangerous and can often leave buyers scrambling before closing. At TD, when you contact a Mobile Mortgage Specialist for a pre-approval, ask for a FULL pre-approval.
This means that we take a full application, run a credit bureau, complete an on-line application and send it through to our adjudication centre for review and approval by a mortgage underwriter. We also send in your paperwork to support the application. This means that the bank has actually seen your income verification (tax returns, letter of employment, paystubs, direct deposit, etc). And we’ve reviewed your assets, liabilities, credit and down payment source. In short, the only thing outstanding after a full pre-approval is issued is the property review. My second word of caution….having a full pre-approval in hand does not mean that you should make your offer firm at the onset… you should ALWAYS make your offer conditional on financing. This allows you (typically) a 5-day period to have the bank finalize the mortgage application by reviewing the property you have chosen. Basically you don’t want to ‘assume’ that every property on the market will meet the bank’s lending guidelines. Most do, but a few don’t.
Once your offer to purchase is made, the TD Mobile Mortgage Specialist will send the MLS listing and the offer to purchase back to the adjudication centre for a quick review. The majority of the time, a “FINAL” approval follows. A final approval means that there will be no surprises in the time between offer and closing.
With a full pre-approval in hand when shopping for a home, both you and your agent can be confident in your affordability, desired price range and, ultimately, your home buying decision.
Regional Sales Manager
TD Canada Trust
416 806 3212