A mortgage pre approval means you're qualified for a mortgage for a given maximum amount. You're also given an estimate for your monthly mortgage payments. Depending on the lender, an interest rate is locked in for 60 to 130 days.
It's important to note with a pre-approval you're not guaranteed to get a mortgage for that maximum amount. The final amount also depends on the purchase price of the property and the amount of down payment you have.
When saving money for your down payment it's important to also keep some money aside for closing costs, moving and other maintenance costs.
The process usually involves a pre-qualification first to give a high-level estimate, then a pre-approval to give a more accurate figure.
It's important to be pre approved before you start your home search so that you know how much you can afford. With the maximum mortgage amount, realtors can also do a better job showing you homes in your price range. In a competitive market having a pre-approval prior to seeing homes is preferred.
You can get a pre approval from a mortgage broker or a lender. Lenders lend money directly to you while brokers compare the options and connect you to one. Here are some common questions to ask your broker or lender:
Some examples of lenders include: banks (TD, Scotiabank, CIBC, etc.), credit unions and mortgage monoline lenders. Breezeful can do the shopping for you and compare up to 30 different lenders to get you the best mortgage.
Pre approvals are often confused with prequalifications. Prequalifications are rough estimates for what you can afford while pre approvals are more accurate because your personal finances are more closely looked at.
Here are some of the things needed by a broker or lender in order to pre approve you for a mortgage:
How long does a mortgage pre approval take?
If you have everything ready it can take up to three days but often a lot sooner. It's valid for 60 to 90 days but can be extended if you update your information/documentation.
Does a mortgage pre approval affect your credit score?
Pre approvals affect your credit score so it's ideal to get with a broker or Breezeful. We only need to check your credit score once to compare it to over 30 lenders in the market.
What credit score do I need to qualify?
In most cases usually a minimum credit score of 620 is needed. The greater the better but sometimes a lower credit score can be offset with a significantly larger down payment.