Mortgage Pre-Qualification: A Worthy Prospect for Getting New Home!

Posted by Rate Shop on February 18th, 2020

So if you are looking for a new home in Canada, the chances are that you have submitted all documents that are necessary for you to get clearances on prequalifying and pre-approved for a home loan. Pre-qualification (Also known as Pre-Approval) is a term that is used in the estimate of how much you could be approved to borrow for a mortgage based on the information you submit about your income, debt, and credit. Also, pre-qualification really doesn’t bring you any closer to securing a mortgage, but it does give you insights you may not have had otherwise.

There is no denying that mortgage pre-qualification is one of the essential prospects along with mortgage pre-approval and mortgage stress test, which often need for people to be cleared with- so it is overall easy for the peer to pay the right personal loan accordingly.  The best part of mortgage pre-qualification step that the Canadian government felt for its people is that it can overall give you a more precise figure on how much you can borrow.

What is Mortgage Pre-Qualification Process?

There are some basics one should know to pre-qualify for a mortgage.

• The first part of the pre-qualification process pertains to your income. The income is your wages or hourly income and besides that, overtime pays bonuses or any commissions that you receive.

• The second part of the pre-qualification process involves looking at homeowners' expenses and debts that he or she may have. With regards to the homeowner's cost that includes the mortgage which is the interest and the principal, but also any tax associated with the house as well as any homeowners' insurance and any home owner's association due or any due associated with the property. The debts also investigated are not just the home mortgage debt, but also the debts with credit cards, and any car payments, student loans or alimony or child support payments and any monthly obligation one has.

• The third part has to do with the total amount of credit card debt that you carry as a relative relationship to the entire credit card limit that you have. If you have a large credit card limit, it does have an impact on your FICA score. So it is necessary to keep the credit card payments down to boost your credit score. After discussing the income, debt and credit score, you will want to know the DTI or the debt to income ratio. The loan companies look at the debt to income ratio as a way of calculating the amount of risk that they incur with the particular borrower.

Before you approach any lender or mortgage broker, try to do some homework and understand whether you can pre-qualify for a mortgage. Prepare the necessary documents and understand the numbers your lenders will present to you. It is a good idea to understand all these things to see the changes you have in the process.

Final Thoughts

Hence, if you’re serious about purchasing the new home, then never miss the steps of mortgage pre-qualification. For complete information on the other essential steps of mortgage pre-approval, you can seek the help of RateShop.ca!