Before you start looking at homes, you should figure out what you can afford by getting pre-approved for a mortgage. Doing some calculations of your own may give you a rough number but with so many factors involved it’s always best to get in touch with a Mortgage Specialist like myself.
Keep in mind that being “pre-qualified” and “pre-approved” are two very different things despite the terms becoming interchangeable over time. Pre-qualifying for a mortgage involves a quick review of your finances to estimate an approximate amount of a mortgage that you may be able to qualify for. On the other hand being pre-approved means actually applying for a mortgage with the approval subject to the home qualifying as well.
Real estate agents and sellers alike often prefer to work with buyers who have already been pre-approved for a mortgage because it saves everyone a lot of time knowing that you can afford the asking price. In multiple offer situations most sellers will also accept an offer from a pre-approved buyer before considering anyone else.
In order to get pre-approved we will need to:
- Gather Financial Information
Provide as much financial information as you can including recent pay stubs, previous tax returns, proof of assets and liabilities along with any debts you may have. The more information I have the easier it will be to get you pre-approved.
- Calculate Your Total Debt Service (TDS)
Your Total Debt Service is an accurate measure of your ability to pay your mortgage by taking into account monthly obligations like car or credit card payments and housing costs. A TDS of 40% or below would be ideal. If you happen to be higher debt consolidation might give you some relief.
- Perform a Credit Check
To perform a credit check I’ll need your social insurance number along with your spouse’s or any co-signer.
It’s always a good idea to request a credit report beforehand in case there are discrepancies. That way you have time to address problems before the process even begins. You are entitled to a free credit report more than once a year so long as it’s requested in writing and you choose to receive the printed copy by mail.
Once we’ve gone over your financial information, marital status etc. you will need to sign some disclosures. At that point your mortgage application will be reviewed, signed and submitted through the underwriting process. When approved Affinity Credit Union will issue a pre-approval letter which outlines the terms of the mortgage approval.
Congratulations! Now that you’re pre-approved for your mortgage you can begin looking for your new home!