Too many people making offers on homes are getting themselves into trouble thinking that their PreApproval that they got from the bank is an actual Approval. To sweeten offers they are taking off Subject to Financing and then getting locked into a contract with no money to back up the purchase because their financing has fallen through.
Pre Approvals are not Approvals. Period.
Getting a full approval from the bank is actually quite time consuming for underwriters (the people at the banks and lending institutions) and to take this much time on “non live” deals makes it silly from a cost stand point.
So then what is a pre approval and why should you bother getting one?
Well first off, it helps you to get a general ball park figure about what your are potentially worth to a bank. Then you can add that to your down payment and hand it to your Realtor and start looking at houses.
If you go as far as to get a Pre Approval in writing from them it can also lock you into whatever today’s low rates are for 90-120 days depending on the institution. This is obviously a huge benefit as well but again, it does take a day or two (depending on the institution) to get and if you go to banks directly they may not offer that up front unless you ask.
Now what is the difference between walking into your bank and going to a Mortgage Broker (a Good Mortgage Broker)? Obviously the Broker is aware of their own hours too and doesn’t want to waste them but typically a Mortgage Broker will not only ask you the preliminary questions like your bank but they will ask the more probing ones to help you understand UP FONT what paper work will be needed to complete a full mortgage application/file and how to qualify your income and down payment PROPERLY to ensure that your pre approval is as accurate and solid as possible.
When you are asked during a Pre Approval how much money do you make and how much will you have for a down payment and what do you think your credit score is etc, you may not, and should not be expected to know, how to properly answer those questions.
For example, just because you make $60k this year does not necessarily mean that you make $60k a year in the banks eyes. You may in actual fact only make $40k salary and $15k commission and $5k bonuses. That is not $60k to a lender. Anytime you have something variable to your income it is never straight forward.
Properly qualifying you for a Pre Approval is important. There is nothing worse then thinking you are worth $300,000, finding the house of your dreams and making an offer only to find that you did not properly qualify a few items on the list or didn’t have access to the proper paperwork and now your deal has fallen through.
If you would like to take a more in depth look at what your your financial situation is and how a bank will value you, feel welcome to give me a call or email anytime. Alternatively you can also fill out an application online.
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Leah Coss
Mortgage Planner
The Mortgage Centre Citywide
604.313.9996
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