NuVista Homes - Blog

Getting pre-approved for a mortgage

Posted on Aug 23, 2021 by Earl Raatz


Getting pre-approved it not scary but their are steps you need to take so you're not disappointed.

First off you might hear two different terms like pre-qualification versus pre-approval but they are exactly the same. So, don’t let others confuse you as each term means the same thing which is securing a certain value of funding that you can have when shopping for a new home.
Some brokers will ask you roughly how much you make and what amount of debt you have and give you a quick pre-approval but this is not the best avenue.


Getting the right questions answered to get a real pre-approval? 

What you need is the lender or broker to ask you all the right questions and for you to obtain the appropriate documents to give you a "true" pre-approval amount that can be verified in writing so you can go shopping for a home with a secure number in mind.

The bank decides how much money they can lend you, based on how much debt you pay each month and also how much you have as a down payment. Each lender might use a different formula, but a general rule of thumb is that they’ll want your total monthly debt payments – including your mortgage payment – to be less than 30 or 40 percent of your monthly income

It’s basic so don’t panic. Getting more in depth with your credit score and financial records only gives you and your lender a clearer picture of what you can spend.
What are these questions and documents?
1. How much do you have as a down payment?  Where are you getting it from? Savings? Gift from family? The more you have, the easier it is but most first time buyers only have 5% dowm.

2. You’ll need a letter of employment (if its bigger organization it will come from HR).

3. Bank statements showing your credit card debt and regular accounts.

4. Lenders will ask for tax returns or notice of assessment.

Once the lender / broker has these documents and they verify them, then you can get a realistic pre-approval. The bank will offer you the best rate based on how you qualify. Don’t be shocked if you don’t get the exact same rate posted. There are things that can affect your rate such as how much of a down payment you have, what is your credit score is, and how far out you are from actually wanting to purchase a home.



Verifying your documents

The next step will be the bank needing to verify your documents and offering you a pre-approval letter or email. This is the real number you want to shop by.   Also, at this time you should get a rate hold from the bank which is an interest rate that the bank will honour if the rates increase. Typically, the rate will be held for 120 days, but just before it expires, you can renew it. If the rate goes down while you are shopping for a home and decide to buy, then most lenders will give you the lower rate.


Don't spend lots during this timeyacht image

One thing you should know is that you can affect your pre-approval during this time by adding new debt during this period. So, don’t go buying a new car, or any big-ticket items or getting a new credit card as you might be disappointed when you find your dream home and your qualifications have changed.

Simply hold off till after you purchase your home to shop for such things and see if you can really afford them.

Owning a new home is truly worth it. This is your space and you get to make the decisions on how you live. Plus, typically homes are great investments and can be a source of security for years.


Start the process early!

It is always a good idea to start this process early even if you are 2 - 3 years away because as you go through the process of pre-approval, you'll see if you have sufficient funds or credit score to purchase the type of home you want. If your funds do not match your desired purchase size then the lender can set you up with a plan to get you where you need to be both financially and credit score wise, to achieve your goals of home ownership.




Get our blog articles sent to your inbox

New Call-to-action

Latest Posts