Buying a home is probably one of the biggest emotional and financial decisions you'll ever make. So it's not surprising that moving is rated as one of the most exciting and stressful times in one's life. Not only are there a lot of things to think about: location, affordability, mortgage term and rate, etc; but there are also quite a few people you'll need to deal with: real estate agent, lender, lawyer, seller, etc. Fortunately, there are a number of tools to help make buying a home an easier and more enjoyable process, one of which is the pre-approved mortgage certificate.
What is a pre-approved mortgage certificate?
This is a certificate that secures a mortgage amount at a guaranteed rate (for fixed-rate mortgages) for a specific length of time. Consider for example the one you can obtain from your mortgage representative: if interest rates increase, your rate will not. And, if interest rates fall, you get the lower rate. You're under no obligation to purchase a home within the time period. If your Pre-Approved Mortgage Certificate expires before you've found a home, you can apply for a new one by calling your mortgage representative.
Why is it important in buying a home?
A pre-approved mortgage certificate allows you to shop confidently and provides you with the security of negotiating a house price that falls comfortably within your budget. Many real estate agents will encourage you to get a pre-approved mortgage certificate before they begin working with you. The fact that you already have your mortgage financing arrangements in place indicates to prospective vendors that you are a serious buyer. The certificate outlines the maximum amount that can be borrowed, the interest rate to be charged, and the monthly payments. Of course, the confirmation is subject to a few conditions such as an appraisal of the property being mortgaged and satisfactory credit review.
What do I need to get one?
Here are some things you'll need to have ready to obtain a pre-approved mortgage certificate:
- Personal information, including identification such as your driver's license
- Details of your job, including confirmation of salary in the form of a letter from your employer
- Sources of income
- Information and details on all bank accounts, loans and other debts
- Proof of financial assets
- Source and amount of down payment and deposit
- Proof of source of funds for the closing costs (these are usually 1.5% of the purchase price)
It's not easy losing out on the home you set your heart on. So before you fall in love and start bargaining, make sure you have a Pre-Approved Mortgage Certificate. With most banks or mortgage brokers, it's absolutely free, with no cost and no obligation. Knowing what you can afford makes buying a home less stressful.