Many Canadian lenders will provide a pre-qualification or an interest rate guarantee to a client while they are looking for a property. The purchaser is then often protected in the event that interest rates increase and, should they decrease the purchaser has the ability to accept the lower rate at the time of closing. A rate guarantee can save a home-buyer money, and ultimately could protect their ability to purchase their dream home.
If interest rates increase then characteristically the amount a borrower can qualify for decreases. If interest rates increase enough and you are purchasing a home at the peak of your price range, then it is quite possible that after the increase, the home that you once qualified for could be out of your reach, or could require a larger down payment to offset the increase in rate.
Should interest rates decrease, the lender will , more often than not, honor the lower rate at the time of closing which would mean your mortgage payments could ultimately decrease, depending on the size of the rate drop.
What does Pre-Qualification Mean? It means the lender has reviewed your documentation, and depending on the institution, possibly sent it to the insurer for approval. A pre-qualification is different from a rate-hold. A rate hold only guarantees your interest rate in the event that you are approved for a mortgage; agreeing to an interest rate does not mean a lender has to follow-through on the approval.
In order to receive a pre-qualification you will have to provide your Mortgage Broker with supporting documents, including but not limited to; employment verification (employment letter and paystub for a T4 employee or Articles of Incorporation for a Stated Income Applicant), and verification of any large debts you may have. The lender reviews these documents and not only provides a rate guarantee but also approves your employment and issues a commitment.
Pre-Qualifications, if done correctly, enable a purchaser to begin their home search and put in an offer, still subject to financing, but provides them and the seller, with the confidence that they have been pre-approved. The only item that should require approval at this time is the property. The lender will want to ensure the property meets their minimum requirements and this is usually determined by an appraisal by a Certified and Designated Appraiser.
A pre-qualification ensures the affordability of the home you are purchasing and provides you, as a buyer, the peace of mind to begin your search. Contact your Calgary and Southern Alberta Mortgage Specialists at MBN Mortgage by clicking on http://www.mbnmortgage.com and they will help you with your pre-qualification and home search.
