Obtaining a Qualified Preapproval
For many first-time buyers, the process of finding a home can be confusing. Here, we’ll demonstrate how to purchase a home – and how we can help along the way.
When shopping for a home, the first step is to figure out how much you can afford. A pre-approval will give you the confidence of knowing that financing is available, and it can put you in a very positive negotiation position against other home buyers who aren’t pre-approved.
In order to get pre-approved for a first-time mortgage, we require information that will determine your buying power. Affordability is based on the household income of the applicants, the monthly expenses (car loans, etc.) and the expenses associated with owning a home (property taxes, condo fees, and heating costs). You also need to determine if you have enough cash resources to secure a mortgage to buy a house. The cash required is for the down payment. In Canada, 5% of the purchase price is usually required* to put down, and in addition there are closing costs which equals 1.5% of the purchase price. Closing costs will cover expenses including legal fees, land transfer tax, etc. that must be incurred to complete the purchase.
Any mortgage with less than a 20% down payment is known as a high-ratio mortgage and requires you to purchase mortgage default insurance, commonly referred to as CMHC or Genworth insurance.
Along with an application and a signed consent to pull your credit report (credit determines what kind of borrower you are and have been in the past), we will request several income documents from you based on your type of income earned. As well, there are many other questions we will need to ask you and the end result will be options that we provide based on your situation.
There are several ways you can submit an application to us. You may apply on-line here, by phone or in house, our office or your location. We can also fax you an application form if you wish.
*We do have some institutions that can still offer the 5% down payment as cash back – NOTE: this is a higher interest rate product.