Many home buyers in Calgary, particularly those that are new to buying real estate, fail to realize the importance of getting their finances in order before they begin to shop for a home. In fact, shopping for a mortgage should be the very first thing you do. Most mortgage lenders offer a service called “pre-approval.” They take your mortgage application in advance of your purchase and approve you for a mortgage before you begin to look for a home. If the rates are favorable at the time of your pre-approval they will hold the rates for you for 90 days in most instances. There are several benefits to making your financial arrangements in advance.
First of all, you’ll have more time to shop around and compare mortgage options if you do it in advance of purchasing. Typically, home sellers want to see you fulfill your financing conditions within a one-week period of time. A new mortgage application can take a week to work its way through the lender’s system. If you wait until after you have an accepted offer on a home, you’ll be rushed and forced to accept what the first lender offers you.
If you get yourself pre-approved for a mortgage you’ll be protected against interest rate increases while you shop for a home. Most lenders will offer buyers their lowest interest rate for 90 days from the time of application. If rates fall, you enjoy the benefits of the lower rate. If they rise, you get the lower rate that the lender agreed to when they processed your application.
Seeing your lender in advance will give you a clear picture of what you can afford to buy. It’s not unusual for lenders and buyers to disagree on this point, so it’s best to know exactly how much of a mortgage you qualify for. You’ll avoid being disappointed after you’ve found the perfect home only to find out that the bank won’t approve your mortgage. You won’t waste time and energy looking at homes that are outside of the price range that you can realistically finance.
A mortgage pre-approval will strengthen your position at the bargaining table. While all real estate offers that are dependent on mortgage financing to complete should contain a “subject to mortgage approval” clause, buyers who are able to prove that they qualify for the purchase are always taken much more seriously than one that hasn’t made these arrangements.
In an active real estate market, buyers can find themselves competing with other buyers to purchase good homes. In areas where listing inventory is low, you can bet that the perfect home for you will also be the perfect home for someone else. It’s not the least bit unusual for sellers to receive more than one offer at a time on the best properties. You can seriously improve your chances of winning in these situations by having your mortgage arrangements made in advance. Having your financing in place tells the seller that you’re serious about purchasing the property. It removes the uncertainty that is present with a buyer who has not yet started the process. It’s even possible that a seller would accept a slightly lower offer from someone that’s been “pre-approved,” rather than taking a chance with a buyer that hasn’t.