A mortgage pre-approval shows you, the home buyer, what value of home you can afford, and the mortgage payments associated with various purchase prices. It also guarantees a mortgage rate for a period of time; therefore, protecting you against potential rate increases. You are not obligated to the bank or mortgage broker to whom you received your mortgage pre-approval, and there is no cost. So, there is limited downside to obtaining a pre-approval.
Home buying process
Once you have found a home that you would like to put an offer on, you will put this offer in writing in a document called an ‘offer to purchase.’ Your real estate agent will help you put the offer together. This offer should include the following details:
- Your name, the name of the vendor and the address of the property
- The purchase price offered
- The chattels that will be included in the purchase price (for example, window coverings, appliances, etc.).
- Whatever items in or around the home that you think are included in the sale should be stated in your offer
- The deposit amount
- The closing day (the date you take possession of the home), which is usually 30 to 60 days from the date of agreement. As of the closing date, the purchaser is responsible for taxes, utilities, repairs and maintenance
- Request for a current land survey of the property
- Date when the offer becomes null and void — that is, when it expires
- Financing Condition: a condition which allows the home buyer to secure financing (i.e. mortgage approval) before the sale is final. If you cannot secure financing, then you can still walk away from the deal and recover your full deposit. Typically, you should ask for 7 days to secure financing
- Home inspection: a condition which allows the home buyer to have the house looked at by a professional inspector prior to making the sale final. If the inspection uncovers something you do not like, then you can still walk away from the deal and recover your full deposit
This process may occur several times over: it is not uncommon to make an offer, receive a counter-offer, and then make revisions.
A Mortgage approval is similar to a pre-approval, but it contains all of the specific details of the house you want to purchase. The mortgage approval will have the full address, exact purchase price, closing date, property taxes, etc. These are details which are not in the mortgage pre-approval. Once your mortgage provider has all of these details, they will give a mortgage approval as long as they are comfortable with the property you are purchasing and your qualifying criteria are in line. Once you have a mortgage approval that you are satisfied with, you can waive your financing condition and finalize the sale.