Why do I Need to Pre-Qualify for a Mortgage

If you’ve already been out searching for your next dream home, you might find that a lot of sellers require potential buyers to pre-qualify for a mortgage. For many buyers, there’s little that will strike more fear in their hearts. What is pre-qualifying for a mortgage? Is that a complicated process, and will it drag out the process of you getting that dream home? And most of all, why do you need to pre-qualify in the first place?
Many sellers require any buyers submitting an offer to pre-qualify for a mortgage because it makes the process much smoother and much quicker. Instead of waiting for the buyer to be approved for financing, the seller can be assured that everything is already in place, and financing will not be one of the conditions on the Offer to Purchase; and with so many conditions often included anyway, the fewer the better for both the buyer and the seller.
Pre-qualifying for a mortgage doesn’t need to be difficult, although it can be easier if you find a Toronto mortgage broker to work with. The mortgage broker will collect certain documents from you, including information about your income, expenses, and debt. They will also ask for your permission to obtain your credit report, which will be needed in order to pre-qualify (or qualify at all, for that matter) for a mortgage. After this, the mortgage broker may obtain your credit report from one of the major credit reporting agencies, or all three. Each Toronto mortgage broker works differently and it doesn’t really matter whether they base their info on one or three reports. If they do the latter, they’ll simply take an average to determine your credit score.
Once the mortgage broker has collected your information and submitted it to different lenders, you will then find out whether you’ve been pre-qualified for a mortgage, or whether you’ve been denied. If you do get pre-approved, the lender will send you a letter stating pre-approval status, the amount you’ve been approved for, and which lender has pre-approved the mortgage.
Getting that pre-approval letter is very exciting, and it does give you a leg up on the competition when looking for your dream home, so it will help you get into that home that much quicker. But it’s also important to remember that a pre-approval letter is no guarantee. And that while it’s a good indication that things will go smoothly with your mortgage, there are other factors in addition to pre-qualification that could hold up the process.