Understanding Your Mortgage Options: Pre-Qualification vs. Pre-Approval

When it comes to looking to buy a Niagara or Hamilton property, unless you are paying cash and do not need a mortgage, the first step in the process will be to reach out to a mortgage expert for your options. 

Mortgage Pre-Qualification 

Getting a Mortgage Pre-Qualification is not a Mortgage Pre-approval but it is a great way to test the waters to get an initial idea of how much you will be able to borrow based on your financial fitness. It will be a general surface-level estimate of how much you will be able to borrow from a financial institution.

A Mortgage Pre-Qualification is less in depth than a Pre-Qualification and you will be asked to provide details like income, debts, and assets. This will be a preliminary evaluation of your ability to borrow but is not a verified process. Pre-qualifications are quick and easy, provide a general idea of your borrowing range and are very helpful in the initial stages of house hunting. Pre-qualifications, however, are not a guarantee because they are not based on verified information.

Even though a Mortgage Pre-qualification is a great start, you will need more than that to buy a home. You will need a Mortgage Pre-Approval. 

Mortgage Pre-Approval

The Mortgage Pre-approval process is much more formal than a Mortgage Pre-Qualification. You will need to complete a formal application and provide all the necessary documents for a very detailed assessment. You will also be required to do a credit check.

With your Pre-Approval, you are now in a strong position of being able to buy a property. You will have confidence when you are house hunting that you are looking in the correct range of homes of which you can afford. With a Mortgage Pre-approval, the closing process will be faster and smoother because your mortgage is pre-verified and guaranteed.  Sellers are likely to be less nervous about a buyer that is pre-approved for a mortgage as well. 

Getting pre-approved is a great first step to getting a mortgage but a pre-approval does NOT guarantee that you will get the mortgage. It is not extremely common but a lender can deny your loan after pre-approval. 

It is important to note that there should be no change in your financing during the time you are house hunting once you receive your pre-approval. Examples of this are; Late Payments on any current monthly bills, applying for new lines of credit, making large purchases like a new car, paying off or closing credit cards, co-signing loans for someone else or changing jobs. It is very important that you have clear and constant communication with your Mortgage Specialist during your home search process before you make and significant financial moves. These significant financial changes in your life can have a negative impact in the days and weeks leading up to your closing. 

Another thing to note with a mortgage pre-approval is that the lender holds the power to accept or deny a loan based on the property meeting other requirements and standards. These standards vary from lender to lender. 

First-Time Home Buyers

Navigating the path to homeownership as a first-time buyer can be exhilarating yet overwhelming. Understanding the available programs, incentives, and financial tools is crucial to making informed decisions. At The Hendriks Team, we provide a comprehensive guide to help you through every step of the process—from understanding the First-Time Home Buyers’ Tax Credit and Ontario’s Land Transfer Tax Rebate to utilizing our Mortgage Calculator and financial resources. Click the link below to explore how you can benefit from these tools and take the first step towards owning your dream home with confidence.

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