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5 key things of mortgage pre approval

Pre Approval First Time Home Buyers

Pre Approval First Time Home Buyers

Everyone needs a place they could call home. However, with changing times and unprecedented scenarios, the rates of homes are skyrocketing.

Due to these high prices, people who are first-time home buyers find it challenging to buy a house. This is where pre-approved mortgage will help you out. These loans are a fantastic way to get the home of your dreams with a minimum down payment.

If you are not an existing home owner and are in the process of purchasing a home, it is in your best interest to go for pre approval as early as possible in the process.

Creditworthiness is established by a lender after the borrower’s credit checks, financial information including incomes, down payments and investments like tax free saving accounts, RRSP and other unregistered investment accounts. 

 

Pre Approval First Time Home Buyers 1

What are the five essential things for pre approval as a first time home buyers?

To get pre approval as a home buyer, you should share proof of income to the lender as well as proof of assets. Up-to-date statements from banks, recent pay stub, T4, T1 Generals, NOA, closing costs, and proof of down payments are required.

To get pre approval for a mortgage, lenders need to access your detailed credit history including your credit score. Beacon score of 670 and up are considered good credit score. Lower credit scores may require higher down payments, while a good beacon score would mean that you would be getting a loan not only at a minimal down payment but also at lower interest rates.

Make sure to pay off any outstanding amount on your credit cards as carrying monthly balance on credit card is deemed as a liability just like any car loan or leases.

Lenders prefer those who are having stable employment. To check that the information you are providing is accurate, the lender will not only see the pay stubs but also check with the employer by calling them. If you are self-employed, be prepared for more documentation to prove your income to a lender.

Down payment is needed for almost every type of mortgage you are aiming to get. Usually, lenders like to see at least 90 days of bank statements as a proof of sufficient down payment based on your purchase price.

Some other documentation, such as government issued valid photo id like driver’s license with date of birth, your social insurance number may be needed.

Who is a first-time homebuyers?

As the name suggests, a first-time homebuyer is an individual who is a Canadian immigrant, permanent residents or a Canadian citizen and has not owned a house throughout their lifetime in any part of the world.

The people who have owned a house in the past and sold it, have a house in a different country or have a home in their spouse’s name are not considered first-time home buyers.

Therefore, we could sum this up as a single person or a couple looking to buy a home who has never owned a home anywhere and will be considered a first-time buyer.

why pre approval

Why Pre Approval is important for first-time homebuyers?

If you are serious about getting a mortgage for your dream house, you should start the process of a pre-approval sooner than later.

A pre approval is the first step when you are looking for a loan. Pre approval provides you with a clear picture of how much amount you can borrow based on your present financial and credit situation.

With no pre approval in hand, you can not be sure about your mortgage amount, or mortgage payments which is based upon the present mortgage stress test rules.

Real estate agents love working with first time home buyers who have already gone through the process of pre-approval because it allows them to negotiate a better deal for you with the seller.

pre approval time

Is there an optimal time for a first-time homebuyer pre approval?

The best time to pre-qualify for a mortgage as a first time home buyer is before speaking or engaging any realtor i.e., early in the process of home buying.

The earlier you start, the better prepared you will be. A good mortgage broker will be able to guide you to address the potential issues especially those related to your credit scores.

Remember the majority of the pre-approvals come with 90 – 120 days of interest rate hold.

When it comes to the booking of newly constructed homes, builder tends to prefer specific banks for their pre approvals.

Are there any first time home buyers incentives from government of Canada?

The Government of Canada is offering an unbeatable opportunity for first-time homebuyers to make their dream a reality!

You can benefit from this shared equity program by receiving between 5%-10% down payment as the incentive amount based on the properties price.

Plus, they have recently announced lowering their interest to 8% maximum instead of 10%.

This means you get more out of any growth in your house while still paying back up to 8%.
The repayment has to be completed within 25 years or when the property is sold or refinanced.

FAQ - Home Buyers Plan (HBP)

F.A.Q.

FIRST TIME HOME BUYER PROGRAM

This federal government program aka Home Buyers Plan HBP allow first time home buyers to withdraw RRSP funds up to $25,000 once with out any income tax on it.

If both you and your spouse/ partner qualifies for this federal government program, you can each borrow up to $25,000. 

As long as you or your partner have not owned a primary residence within last 5 years and you are buying this property to live in you may be qualified for home buyers plan (HBP).

YES, you have to pay the rrsp withdrawn under the home buyers plan as a first time home buyer.

As per the plan all first time home buyers should start paying the rrsp loan back from year two onwards. 

In general 1/15th of the borrowed rrsp funds under home buyers plan should be paid off every year. Any unpaid amount will be taxed in year 15.

If you buying  a primary residence in Ontario you may qualify for a Land Transfer Tax rebate from provincial government. You may receive back up to $4,000 in taxes you paid when buying your first home in Ontario.

To learn more click this CRA link now.

Yes Indeed!

If you are ready to buy your first home in Ontario Canada, You should speak to a mortgage expert who will take time to sit with you, evaluate your situation in detail, gather income and down payment documents and is willing to evaluate your credit details. 

Being pre approved has become critical for all first time home buyers since Jan 01, 2018 when mortgage stress test was implemented. Everyone who has purchased a home in past or are first time home buyers has to pass the mortgage stress test.

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Is there a difference between Pre-Qualification and Pre-Approval mortgages?

Yes, pre-qualify, and pre-approvals are different.

To pre qualify for a mortgage is step one in buying your house. It tells the borrower the mortgage loan amount based on the key figures you provide. No documents are verified 

Pre-approval, on the other hand, is a comprehensive and detailed process which required submitting all the supporting documents to t a lender in advance. The lender checks your creditworthiness based on your existing liabilities and confirms the mortgage loan amount among with the rate of interest and other mortgage-related terms and conditions. 

The process of pre-approval is long and requires lots of time upfront from your mortgage broker.

 

What are the alternatives for a Borrowers if they are not approved for a loan by the bank?

If you are not getting approved by a bank to get a loan for your home, we will help you get lenders who will be willing to give you money.

As an independent mortgage broker, we have access to Banks, MCF, REITS and MIC, who can help you get the mortgage you need.

 

alternative when bank says no.

This will keep you stress-free, and you can get a home of your choice.

It should be noted that pre-approval would give you a clear picture, of where you stand and what should be your maximum purchase price.

Looking for smooth and quicker mortgage approval? Get in touch with us today.

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