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How To Get Pre-Approved For a Mortgage - YouTube
Channel: Nolan Matthias
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hey welcome back it's nolan mathias for
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mortgage 360 and this is part two in our
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six part series on first time home
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buyers
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today we're talking everything
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pre-approvals from what you need to do
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in preparation to
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what a real pre-approval is to what a
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pre-approval versus a pre-qualification
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is because the fact that those two terms
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are confused
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is ridiculous uh but before we get into
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it doing that favor hit the subscribe
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button hit that notification bell and
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please hit that like button for the
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youtube algorithm
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okay so in our first video in part one
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of our first time homebuyer series we
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talked about
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how to get a down payment how to save
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for a down payment how to get a
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down payment gifted for you how to start
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a side hustle all things down payment
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but today
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you know we're hitting that next step
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we're hitting that step that is all
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about figuring out
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how much you actually afford the
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pre-approval and this is going to be an
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interesting conversation because it's an
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it's a conversation that for first time
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home buyers is confusing
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for normal home buyers for people who
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have bought multiple homes it's
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confusing
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for realtors it's confusing and they do
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deal with this stuff every single day
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it's just a confusing topic so let's
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start right out of the gate with talking
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about
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pre-approvals versus pre-qualifications
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because you know what if you go into
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some broker some banks they'll tell you
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that you need a pre-qualification and
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other brokers and banks will tell you
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you need a pre-approval and some
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realtors will tell you need one or the
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other and
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let's just make it really freaking clear
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right out of the gate
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the fact that people distinguish between
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a pre-approval and a pre-qualification
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and the fact that people mix them up and
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so on and so forth
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basically makes these terms exactly the
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same thing
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pre-approval pre-qualification it is an
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identical thing
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what matters is not what you call it
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what matters is how far
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into the process somebody goes and how
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deep they go into your financial
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situation
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in order to determine what you qualify
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for so it's not the name
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it's the quality that matters and how do
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you know the quality of your
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pre-approval
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well it's really simple it's what
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questions do they ask and then what
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documents do they ask for to back up the
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answers that you gave
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so in other words if you get a
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pre-approval and someone just says hey
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how much do you make how much debt do
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you have
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okay sure go out and buy a house up to
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650 000
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that's not a very good pre-approval but
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if a broker or bank
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asks you what your income is then ask
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you to provide things like job letters
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and bank statements
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and notice of assessments and tax
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returns and ask you for the actual
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documentation that would be required to
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verify what you told them
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and then pulls your credit and goes
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through a complete application process
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that is a valid pre-approval or a valid
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pre-qualification
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and there can be a huge difference
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between what you qualify for if somebody
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verifies your documents versus doesn't
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we often have clients referred to us
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that have been pre-approved by somebody
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else
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that end up with a six hundred thousand
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dollar pre-approval when they only
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actually qualified for four or four
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hundred and fifty thousand dollars
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because
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when the broker or the bank asked them
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what their income was
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they said oh well i make eighty thousand
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dollars a year but what the bank of the
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brook failed to ask is how is that
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income comprised
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is part of it bonus as part of it over
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time is it all salary or
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all hourly how many hours are you
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guaranteed there's all these questions
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that come along with verifying
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somebody's income
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that if you don't actually get a job
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letter and a pay stub or tax returns or
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all the things that come along with
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verifying an income
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the pre-approval you're giving them
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isn't worth the piece of paper that it's
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written on
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so again quality matters and quality all
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comes down to verification verification
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verification
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so what can you expect when you go to
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get a pre-approval well first of all
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you're going to start with a mortgage
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application
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because anybody who quotes you interest
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rates without seeing an actual mortgage
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application first
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is just guessing there's too many
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components that go along with pricing a
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mortgage for a broker or a bank to say
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hey
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this is the interest rate you're going
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to get because there's all sorts of
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things that can affect your
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grade it could be your income it could
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be when you're purchasing the property
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how far out you are it could be how much
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down payment you're providing
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it could be what your credit score is
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all of these things affect interest
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rates so
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for somebody to quote you an interest
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rate or for you to go on a rate website
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and say hey i want to see what it would
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cost me for a five year fix and have a
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rate pop up and expect that you're going
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to get that rate
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is absolutely absurd so the first step
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will be to fill out that application the
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second step will be to provide the
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documents that support the
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application that you filled out so for
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most people that's going to be a job
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letter and a pay stub the job literal
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state
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your salary your time a job and your
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position it'll come from your employer
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if your employer is a relatively large
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company it'll come from the hr
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department if it's a smaller company
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it'll probably come from your direct
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manager then you'll need to provide a
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pay stub
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and you'll need to provide 90 days bank
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statement showing where your down
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payment is coming from if it's coming
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from your savings or your rrsp
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if it's coming from a gift all you need
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to provide typically is a bank statement
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showing that the money's been deposited
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into your account and then a gift letter
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from the family member who's providing
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the down payment to you
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and by the way you can do a combination
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of savings and gift you don't have to
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pick one or the other
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you just have to provide supporting
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documentation that supports both if
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you're getting a combination of a gift
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and a
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down payment from savings from there
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your broker or your bank will put
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together the numbers for you they'll
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calculate what your maximum purchase
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price is
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and they'll usually send you a
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pre-approval letter or pre-approval
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email stating what those numbers are
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now one thing to note is that there's
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often confusion around who does a
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pre-approval and who doesn't so
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when you get a pre-approval you're
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getting a pre-approval from your lender
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the lender saying we're willing to take
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on this client now if your mortgage is
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getting insured
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insurers don't do pre-approvals so in
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other words cmhc genworth canada
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guarantee they aren't going to look at
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your deal until such time as you've
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actually written an offer on a house so
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if your mortgage is going to be insured
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your pre-approval is only your bank's
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willingness to do the approval it's not
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cmhc genworth or canada guarantees
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you have to wait for that until such
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time as you've got a live deal on a
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property now when you go to get your
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pre-approval your bank is also going to
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pull your credit at that time
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and this is why it's important to start
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your pre-approval process early and i
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mean
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when you start thinking about the fact
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that buying a house is going to be
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something that's in your future
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that could be two three four years
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before you actually plan to do so
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because
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when your broker your bank pulls your
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credit if it isn't sufficient or if your
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income isn't sufficient in order to
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warrant the purchase price that you're
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going to look at for a property then
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what they can do is they can help you
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set up a plan to get where you need to
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go both income-wise
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and both from a credit standpoint now if
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your credit's good and your income is
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good
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what your pre-approval will also have
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with it is a rate hold
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and what the rate hold does is it
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protects you from rising interest rates
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now in most cases your rate hold rate is
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going to be higher than what the current
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market rate is
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this is because the banks have to hedge
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the interest rate that they're offering
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you
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in most cases if you purchase a property
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and rates are lower than your rate hold
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rate
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the bank or the broker that you dealt
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with is going to honor the lower rate
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whichever it is the one that they gave
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you a rate hold for
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or the current market rate at the time
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if you're getting your mortgage to a
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broker
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the broker may very well get you a rate
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hold at one lender and then when you go
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to write an actual offer on a property
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if there's better rates elsewhere they
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may
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recommend a different lender at the time
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that you actually go to get your
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approval for your mortgage
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now one other thing to note is that
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pre-approvals don't typically expire
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yes the rate holds that come with them
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they do expire
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typically in about 120 days so you want
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to make sure that if you go more than
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four months from the time that you get
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your pre-approval that you get your rate
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hold renewed at 120 days but a
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pre-approval itself
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is typically good as long as interest
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rates haven't changed
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your borrowing power hasn't changed so
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in other words you haven't bought
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anything else on credit
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and that your income has remained
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relatively the same if any of those
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things change while you're pre-approved
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and before you purchase a property then
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you want to connect with your broker or
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your bank
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in order to get your pre-approval
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updated by the way the number one thing
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that makes pre-approvals go bad
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is people buying on credit after they've
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got their pre-approval so buying a car
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or buying furniture on credit
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or getting a new credit card and running
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up the credit card those are the things
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that often affect a pre-approval and
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make them no longer valid once you've
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got your fully
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verified pre-approval or
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pre-qualification it's time to go
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shopping for a house
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in our next video we're going to talk
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about how to select a realtor and you
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might be surprised at our rationale for
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how you go about doing that
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but in order to see that video do me
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that favor hit that subscribe button hit
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it immediately
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and for this video do me a favor hit
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