A Real Estate News Article from Yvan D'Addario Real Estate Sales Representative Royal LePage Your Community Realty Many prospective buyers ask me for the difference between being pre-qualified for a mortgage and pre-approved. When it comes to first time condominium buyers looking to purchase, in a hot neighbourhood, a Toronto Waterfront condo, King West condo, Liberty Village condo or Distillery District condo, this distinction is crucial to understand in order to help you obtain the home you love without disappointments. Pre-Qualification The first step before you begin viewing properties with me is to speak to a bank or mortgage broker to discover the budgetary range for condos that you can afford and how much you can borrow. This step involves discussing your income, assets, debts and down payment amounts. During this process there is no commitment from either you or the lender, but pre-qualification is useful in order to understand your financial limits and clarify any questions you may have. Pre-Approval While pre-qualification is a suggested step, pre-approval is strongly recommended. Pre-approval for a mortgage means you receive a tentative commitment from a lender for a mortgage. This step is more comprehensive and requires you to provide specific documentation to prove your income, assets and debts. There is usually a nominal fee for this process since the bank will pull your credit report and investigate your employment status. Once you are approved, a lender will give you a Letter of Commitment which explains the price range you can afford for a Toronto condominium based on the interest rate stated in the letter. This interest rate will be locked in for you over a certain time period. Sellers will have more confidence in your offer to purchase if you have been pre-approved. A crucial point to remember is that a Letter of Commitment is not a guarantee that a lender will give you a mortgage. Obtaining a mortgage from a lender depends on an appraisal of the property, title search and other information on the home that is acceptable to the lender. Keep in mind that if your gross debt service ratio or total debt service ratio changes significantly during the period specified in the Letter of Commitment because you make major purchases or incur debts you may not qualify. That is why it is best not to buy that new furniture set or book that overseas holiday during your buying process! Now you have the basic mortgage information knowledge you require to achieve what you want and Live the Lifestyle of Your Dreams in a great Toronto Waterfront condo, King West condo, Liberty Village condo or Distillery District condo. Contact me and let us get started! |
