Mortgage pre-approvals not written in stone – Comfree Magazine
Getting pre-approved for a mortgage before you start house hunting seriously is a great way to plan ahead, but home buyers must remember a pre-approval doesn’t mean you are able to purchase any house in your approved price range.
A pre-approval is a great idea because it gives you a good idea of how much you can spend on a house, so you don’t waste your own time, or the time of any sellers by looking at homes that are too high for your price range or too low for your price range. Visiting a bank or mortgage broker and obtaining a pre-approval early also allows the potential home buyer some freedom to shop around and find the best interest rate and lock that interest rate in while they are looking for their future home.
“A mortgage pre-approval will show you exactly where you stand with the bank,” said Jim Gwartney, a lawyer with Venture Law Group LLP. “So when you go shopping, you know how much you can spend before you even start looking.”
But one thing those on the house market have to be aware of, is that just because you have a pre-qualification for a certain amount, you are never pre-qualified for a specific house. The bank still has to be convinced the house is a good fit for you.
“You may be qualified to spend a certain amount, but that pre-qualification is contingent on the property you want to purchase. The bank still has to view and inspect the property and if they don’t think it’s worth the price, you’re not qualified to buy that property,” warns Gwartney.
He said it is not a common occurrence for a bank to do that in today’s market, but it happens occasionally and it’s something home buyers need to be aware of. “I’ve seen banks say ‘this house is way overpriced and our appraiser thinks it is worth significantly less, so we’re not going to give you the loan,’” he said.
So how do you avoid these types of problems?
Gwartney says go to the bank or mortgage broker and get pre-qualified. Talk to them about CMHC or insured mortgages if you don’t have 25 per cent down and lock in an interest rate. Be a smart shopper by finding a house with good value and give your bank lots of time to view the property.
When purchasing or selling a home, one of the most important things to take care of is insurance. Gwartney will explain how and when to transfer the insurance of the home, in the next edition.
Published in the Comfree Real Estate Magazine.