Rick Boire REALTOR - Realty Executives Saskatoon

Pre-Qualify for a Mortgage

Why get prequalified and then preapproved for a mortgage before you begin your search for a home? Because there are 3 people who will benefit from your preapproval:

You: The most important beneficiary, of course, is you. One of the most common questions I get is "Please let me know how much house I can afford. There are simply too many variables--credit history, income, debt, special mortgage programs and variations in qualifying guidelines between different mortgage types--to answer that question. The only sure way of getting the question answered is through prequalification. The mortgage prequalification step is a relatively simple one, but it is an important one. It begins the process of formally applying for a mortgage and it gives everyone involved - especially you - a clear sense of direction.

Me: By knowing what your financial parameters are, I can spend more time looking for houses that "fit" and less time pursuing dead ends. No matter how much you might want a 2000 square foot home for $225,000, if your qualifications say $155,000 - your qualifications are $155,000.

The Seller: Want to strengthen your bargaining position? Get prequalified. Want your offer to stand out in a case of multiple offers for the same house? Get prequalified. Look at it from the Seller's perspective. If you had 2 offers on the table for your house, one from a fully prequalified Buyer and the other from an "I'll get around to that soon" Buyer--to which offer would you devote the most attention? Even if the prequalified Buyer's offer was $1000 lower, would you take the chance on the Buyer that perhaps may not be qualified? When it comes to a Seller evaluating offers, "a bird in the hand..." definitely applies.

It is important to remember that the amount of mortgage you will qualify for is the maximum. It is the amount that the lender feels you can afford, but it is not necessarily the amount that you want to pay. It sometimes is advantageous to be conservative here. For example, if you qualify for a $100,000 mortgage and you have $15,000 available in cash for downpayment and closing costs, you are qualified to buy homes with a maximum selling price of $115,000. So you don’t push yourself to the limit, you may want to look at homes that sell in the $100,000 to $110,000 range. Too many buyers simply rush off to the $115,000 level and find themselves strapped when it comes time to purchase necessary items (such as draperies, additional furniture and lawn and garden tools), or when they forget to factor in increases in monthly expenses (such as utilities, maintenance and repair costs).

Preapprovals: Virtually every lender will be able to process a preapproval for you. I am able to recommend a number of financial institutions that have provided excellent service to my past clients.