I speak to many people who are out looking for their 1st home, maybe even moving up to something bigger, and think they have a very good idea of what they can afford. This couldn’t be furthest from reality. To save yourself from the disappointment of finding out that you have been denied financing at the point of making an offer on a home, take one step back and head to a mortgage professional! The banks and CMHC are tightening up the rules once again! It is critical to determine what you can afford prior to making the offer.
Here is some terminology you should know!
Pre-Qualification: This does not mean you have been approved for a loan. This is a discussion with a mortgage professional involving a candid conversation about your income, assets & liabilities. This step will save you time and money but will not guarantee a mortgage. This is an estimate of how much home you can afford.
Pre-Approval: At this step the lender will dig deeper, including running credit checks, verify employment and financial information. The bank with provide you with a letter of commitment. It is important to note that this is still not a guarantee that you will get approval. Once you have selected a home, the bank with do further checks on the home itself (i.e. appraisal, title search, and other verifications).