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Mal Eccles CPMB
In today's real estate market, many home buyers are pre-qualifying for their mortgage financing before embarking on a search for their dream home. This process helps determine the maximum price range the prospective purchasers should be looking at. It also provides peace-of-mind for the purchasers that they will be able to afford the house they are looking at.
But what does pre-qualifying really mean, and how much should a potential purchaser rely on this information?
First, let's look at the difference between being "pre-qualified" and being "pre-approved".
Pre-qualified is simply a mathematical formula to determine if you make enough money to service the mortgage debt. It does not take into account credit history, or quality of income. If you are a salaried employee at your job for over three years, you should have no problems verifying the income that you are using for the qualifying calculation. But if you are self-employed, commissioned, new to your job, have part-time income, or any number of other circumstances, the lenders may not allow you to use some or all of your income when qualifying for a mortgage.
Pre-approved, while more meaningful, still has a number of pitfalls attached. Pre-approved normally means the lender has pulled a credit report to ensure your Beacon Score falls within their acceptable guidelines. Pre-approved normally means the lender has reviewed the income confirmation supplied and it is acceptable to them. Pre-approved normally means the lender has reviewed the documentation supplied to confirm the availability of downpayment. Normally, but not always!
If your pre-approval document is subject to satisfactory credit, satisfactory confirmation of income as stated, or satisfactory confirmation of equity, the lender may not have actually performed the verifications listed above. In which case your pre-approval is no more than a pre-qualification.
However the biggest caveat with pre-approvals, is that they are almost always subject to you, the purchaser, buying a property satisfactory to the lender. Because the property will act as the main security for your loan, the lender wants to be sure the property you are buying will be marketable and provide them with sufficient equity in case of default. Of course satisfactory is a subjective term and can be used by the lender to find any reason to decline your mortgage at a later date.
Even with a pre-approval in your hands, you should never make a firm and binding offer to purchase. Any offer should be subject to arranging satisfactory financing (satisfactory to you). This allows the lender to perform all of the verifications required and also determine if the property meets their standards. Even after you have received your formal mortgage commitment, you should never waive your condition on financing until all conditions in the mortgage commitment have been met (or are likely to be met with no problems). There is nothing worse than approaching the closing date of your transaction and finding out that there is no mortgage in place.
Working with a mortgage professional is your best way to ensure all the "i"'s are dotted, all the "t"'s are crossed and that the mortgage funds will arrive on your lawyer's desk in time for a smooth closing.
Rates For
Tue, Mar 9, 2010
9:43 am
| 1 Year (Closed) | |
| CIR: 2.75 | Bank: 5.70 |
| 1 Year (Convertible) | |
| CIR: 2.75 | Bank: 5.70 |
| 1 Year (Open) | |
| CIR: 2.75 | Bank: 5.70 |
| 2 Years | |
| CIR: 3.05 | Bank: 3.26 |
| 3 Years | |
| CIR: 3.25 | Bank: 3.66 |
| 4 Years | |
| CIR: 3.69 | Bank: 5.10 |
| 5 Years | |
| CIR: 3.89 | Bank: 5.40 |
| 7 Years | |
| CIR: 5.30 | Bank: 6.0 |
| 10 Years | |
| CIR: 5.40 | Bank: 6.10 |
