What is a Pre-Approval?

There are hundreds of terms floating around the mortgage sphere about pre-approvals, and all the different terminology can get very confusing! You are probably aware of the importance of getting a pre-approval in the mortgage process, but it’s crucial to know the in’s and out’s before diving in.

The basic definition of a mortgage pre-approval is simply the information you provide to a lender in order to be approved for a mortgage. The information you provide will be entered into a computer and based on the lender’s algorithm the professional will be able to tell you how much you can afford.

The pre-approval process is as follows:

1. The Application

There is a series of questions you will have to answer and basic information you will need to provide for the application process. These include, but aren’t limited to:

• Social Insurance Number
• Employment History
• Address
• List of Assets

2. The Credit Bureau

Once you’ve sent in your application, your mortgage professional has the go-ahead to check out your credit scores. They will look at your entire credit bureau and ask you questions if they see any concerns. Knowing these things ahead of time will greatly help in speeding up the process later.

3. Proof of Documentation

The documentation required by an approval can be extensive. Here is a list of documents you should start preparing in case any problems need to be addressed:

• Letter of Employment
• Proof of Down Payment
• Pay stubs
• 2 Years Notice of Assessments and T1
• Bankruptcy Documents
• Divorce/Separation Agreement

4. The Submission

Once all of these elements are complete, the pre-approval can be sent to the potential lender. The lender will be looking at your risk level to determine if you are an appropriate risk. Once they’ve conditionally accepted the pre-approval, the outcome is subject to the home you choose and finding a mortgage insurer.

Preparing for your pre-approval ahead of time is a great idea whether you are moving or buying your first home. Having everything ready in advance will speed up the process and help you get into your new home sooner. Contact your local mortgage professional or AC Lending Group today to get this process started!