HOW MORTGAGE PREAPPROVAL CAN IMPROVE YOUR BUYING EXPERIENCE

So, you want to buy real estate, but instead of enjoying the experience you’re finding yourself overwhelmed with questions: How do I find a realtor to help me? How do I start looking at houses? What is a home inspection? What about home insurance...? And the list goes on.

I’ve responded to all these questions – and more—but the first one I usually ask a new client is: have you talked to a lender yet?

Imagine you’re looking at a new sled and you want the PTX 4000 8 Series (as you can tell I know nothing about sledding. Please sledders reading, call me up and school me). The sled retailer takes you out on it and you have a great day. You decide this is the sled you want to buy. Then, you find out the price, and it turns out you can only afford the trailer you’ll need to transport the sled. Same goes for real estate. Before we go look at property and start digging in it’s good to know what you can afford to finance. This is why I ask all my clients to talk to a bank or a mortgage broker before you start this process, so we can start looking at real estate in the price point you can afford or want to pay. When you are applying for a mortgage pre-qualification the bank or lender will be looking at your debt-to-income ratio (DTI). Which is all your monthly debt payments divided by your gross monthly income. Documents they may ask for include: a job letter, previous years of T4’s and Notice of Assessment from the CRA, financial statements if you’re self-employed, and a letter for any gifted money. They will typically do a credit check with your permission to see what you have in outstanding debt.

In real life when you apply for a mortgage the bank or mortgage lender will quote you with a pre-approved rate held for a fixed amount of time. As of the date this article was written the posted rate for a five-year fixed insured rate is 5.09%. This means your mortgage payments will be approximately $600 monthly for each $100,000 borrowed. If you do the math, if you were to borrow $400,000 your monthly mortgage payment would be approximately $2,400. The bank will also make sure that not only do you qualify at the posted rate, but also make sure you qualify for the stress test rate, which is generally 2% higher than the posted rate. Just in case things get spicey again and rates go up. This article certainly does not encompass everything you need to know but will get you started. Ready to have the conversation with me about buying? Call me up to chat and we can get you started. Or perhaps you’re planning on selling. Call me again and we can talk strategy about how to make the mortgage you have work for you.

*Tara Sutherland, Associate Broker – RE/MAX Revelstoke Realty – 250-814-8677 or tara@revelstoke-realty.com