So You're Pre-Approved! ... Or Are You?

PREPARING FINANCIALLY to buy a home can be scary. If you don't figure out in advance how much you can afford, you may get your heart set on your dream house, and then not qualify for the mortgage, or you may get the mortgage but be unable to make the payments. It is a wise idea to get 'pre-qualified' before you start looking for a home. This process takes into account your total family income, the amount you have available for a down payment, estimated property taxes, heating costs, condo fees (where applicable) and other monthly expenses (credit cards, other loans, etc.). Once you have been pre-qualified, you'll have a better idea in what price range your new home purchase will be and the estimated costs involved. A lender pre-approval is usually given in the form of a 'pre-approval certificate'. It will quote the rate, expiry date, maximum mortgage amount and any approval conditions still to be satisfied.

HERE IS WHERE most problems occur! For example, the income you declared is still subject to verification — usually tax returns for the past 3 years. You may have earned $70,000 gross in your business but your smart accountant may have been able to have you pay tax on only $10,000. The lender may well disregard the $70,000 figure and only give you credit for $10,000. Now you don't qualify for the mortgage after all. Same goes for your credit rating. If you believe it to be fine but the credit bureau report shows several late payments to various credit card issuers that you forgot, your pre-approval may be worthless.

HOW DO YOU ENSURE that the pre-approval certificate is worth the paper it is written on? Make sure the financial institution has all your financial information and that they have checked your credit rating prior to their issuing a pre-approval.

HAPPY house hunting!

Gary Greer, co-owner – Mortgage Plus

Back to list of Articles            Top