A pre-approval is given by a lender to show that they are willing to lend a certain amount to a potential buyer. A pre-approval breaks the “window shopping” cycle, and gives homebuyers concrete information on what homes they are able to afford. The amount lenders are willing to lend is based on four main criteria:
Capacity: Is the buyer able to afford mortgage payments? This is based on the buyer’s income as well as expenses.
Capital: Does the buyer have a down payment that they are willing to invest in the purchase?
Credit: Does the buyer have a good history of paying back debts?
Collateral: What home are they looking to purchase?
This pre-approval, and additional information supplied by a mortgage broker can help the homebuyer understand their budget, affordability, possible mortgage payments, and expenses. In Saskatchewan, the real estate market is very competitive, and getting a pre-approval will help homebuyers to quickly make an offer on the right home.
A pre-approved buyer is easier to work with for all members of a real estate transaction. By having a pre-approval, the homebuyer is better prepared to make an offer on their dream home, and can save time and energy by searching for homes in their price range. It is also preferred by real estate agents, as it ensures that they are not investing time in searching for homes that the homebuyer can’t afford.
Getting pre-approved also shows the lender that you are able to pay them back, and will help you get a faster commitment from them to finance your mortgage. This will also give you an upper hand when making an offer on a house. Your pre-approval will help ensure the seller that you are serious about buying, and committed to the purchase of the home. In a competitive housing market like Saskatchewan, this will give homebuyers an upper hand when multiple offers are made to the seller. When faced with competing offers, sellers are more likely to accept an offer from a pre-approved buyer, as they are assured that the buyer has the appropriate criteria to secure a loan.
As you can see, getting pre-approved before buying is a critical first step to the home buying process.
Are you interested in getting pre-approved for a mortgage? Apply in minutes for a 100% free pre-approval today!