Talking more about your mortgage questions!
In this video, Chris Molder, a Toronto mortgage broker, sits down to talk about how you can avoid mortgage nightmares by making sure you have a pre-approval in place before you start shopping for a home.
Avoiding mortgage nightmares by getting a pre-approval
Don’t feel like watching? Find the full transcript below!
Mortgage nightmares do exist! If you don’t have a pre-approval in place, you’ll want to check this out.
How can I avoid mortgage nightmares by getting a pre-approval?
Real estate nightmares really do exist and they look a little bit something like this. You go out, find the perfect home, submit an offer, go back and forth, negotiating with multiple offers, driving up the price, spending a whole night with your realtor, trying to negotiate. You make your deposit, it finally gets accepted and then surprise, you are not qualified for your mortgage financing. There’s no reason anybody should be living this nightmare and yet people do. There is a very simple solution on how to avoid it. And that solution is called a preapproval.
So let’s review exactly what a preapproval does and also what a preapproval does not do.
Why you should consider getting a pre-approval
There are two reasons why you want to get a preapproval. And the first is the most important because, through that preapproval process, you’re sitting down with a professional, whether it’s a mortgage broker or your banker, to have them review your entire application before you submit an offer. This process is really critical to any hurdles that you might overcome and set expectations.
The second reason why a preapproval is great is that it locks in an interest rate for you for what’s typically a 120 period. So that way, if interest rates go up, you at least have a ceiling as to how high your mortgage will be. Now, if rates go down, of course, you get the benefit of a lower interest rate. While the approval is really great to set expectations on what your max mortgage qualification budget is and what your interest rate is going to be, there’s one thing that it does not do, and that is it is not designed to give you a guarantee that you are approved or qualified for that mortgage amount.
Getting a pre-approval can help you navigate the unknowns
There can be some unknowns that still exist when you’re making an offer specifically around the property itself that you’re buying. So some of those issues might be that the appraised value does not agree with the price that you paid for the home. And in a market like Toronto, where prices are being driven up so aggressively, there are occasions where an appraiser just cannot justify a purchase price. Other risks associated with the property may include things like asbestos being present in the property or Knob-and-tube electrical still being present in the property, which present issues from an insurance point of view and mean that the lender may have something to say about whether they provide you with the mortgage financing that you need.
Having a preapproval in place before you do any home shopping is critical. So I urge you not to live the nightmare and please go out and get a preapproval. Talk to myself as a mortgage broker. If you’ve been referred to another mortgage broker, talk to them. Talk to your banker, but please get a preapproval in place. My name is Chris Molder, a Toronto mortgage broker. Thanks for stopping by.
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