Are You Pre-Approved?

As a buyer’s agent it’s my responsibility to know if my clients are pre-approved.  When I am contacted by a potential new client requesting to see a home, I ask this question upfront.

Unfortunately some have construed this to mean that they have to write an offer immediately or even sight unseen.   Consider the following response I received after asking if they had been pre-approved:

“u should not be worried abt my financing, preapproval, mortgage etc
According to my point of view first of all look through the property physically. I m not going to throw a offer right a way without walk through a property.
But anyway if u r not interested to show this property i m fine with this. As u knw so many properties and so many realtors in this city.”

Ouch.  It stings when you get this type of response when you’re only doing your job.    As you can see from my client testimonials, I’m not the type to pressure or rush someone into making a decision.

Needless to say, I thanked them for their time and wished them all the best.   Eventually they’ll realize that all agents are not equal and just because there are 5000+ in Calgary doesn’t mean you can randomly select one and get the same results.

Perhaps later they’ll have an epiphany and ask themselves:  if the buyer’s agent didn’t do their job by vetting their client, what else aren’t they doing for me that they should have been?

If you were a seller, how would you feel if agents were scheduling showings with buyers that might not even be able to purchase your home?

Getting a pre-approval is easy and doesn’t mean you have to go forward right away with any purchase.

What Is The Pre-Approval Process?

The following is taken from the Financial Consumer Agency of Canada.

A pre-approval is a preliminary discussion with a potential mortgage lender to find out the maximum amount they will lend you and at what interest rate. With a pre-approval, you can do the following:

  • Lock in an interest rate in case interest rates rise before you purchase a home. The length of the interest rate guarantee varies by financial institution and usually ranges from 60 to 120 days. If interest rates fall before you purchase a home, you may or may not be able to get the lower rate, depending on the lender’s policies for pre-approvals.
  •  estimate your mortgage payment, so that you can include it in your budget.
  • Know the maximum amount of a mortgage that you qualify for, so that you don’t waste time looking for homes that are too expensive.

A pre-approval does not guarantee that you will get the mortgage loan. Once you have a specific home in mind, the lender will want to verify that the home or property meets certain standards (such as the condition or market value of the home) before approving your loan. At that point, the lender could decide to refuse your mortgage application, even though you had received a pre-approval for a certain amount.

Keep in mind that the pre-approved amount is the maximum you could receive. It may be a good idea to look at homes in a lower price range so that your budget will not be stretched to the limit.

Remember to include in your budget any additional costs you expect in the near future, such as starting a family or buying a car. Also remember to factor in closing costs and moving costs.

(See blogpost:  Don’t let the closing costs surprise you)

When you shop for a mortgage, compare the whole package each lender offers: interest rates as well as features and services that are important to you, such as the ability to make lump-sum prepayments or to increase your regular payments.

Don’t underestimate a small difference in interest rates between offers. A difference that might seem small, such as half a percent, can add up to a significant amount of interest over the length of a mortgage.

Remember that interest rates are often negotiable. Don’t accept the first offer made to you. Make sure you have explored other offers to find one that best meets your needs.

What you should bring to a pre-approval interview?

The pre-approval process is different and more indepth than just being pre-qualified.   A pre-approval requires checking your credit score and will require proof of the figures you present.

When you are speaking to a potential mortgage broker or lender, it is a good idea to have the following information handy:

  • identification
  • proof of employment.
    -proof of current salary or hourly pay rate (for example, a current pay stub and a letter from your employer)
    -position and length of time with the organization
    -if self-employed, bring your Notices of Assessment from Canada Revenue Agency from the past two years
  • proof you can pay for the down payment and closing costs
    -recent financial statements (bank accounts, investments)
  • information about your other assets, such as a car, cottage or boat
  •  information about your debts or financial obligations
    -credit card balances and limits, including those on store credit cards
    -child or spousal support amounts
    -car loans or leases
    -lines of credit
    -student loans
    -other loans.

More more information, download the PDF from the Financial Consumer Agency of Canada:  ABC of Mortgages

A pre-approval will save you time down the road if  & when you’re ready to submit an offer.  It will uncover any issues with your credit history that you may have not been aware of so you can rectify it.

So the next time a buyer’s agent asks you if you have been pre-approved, remember they’re doing their job and it’s in your best interest.

Mortgage brokers, I invite you to post your comments, tips and viewpoints below.

3 responses to “Are You Pre-Approved?

  1. Mike, I couldn’t agree more with you on clients being well informed and qualified to buy. Experienced Mortgage Brokers will become Trusted Advisors to real estate buyers, letting them know their options for financing.
    It only takes a few additional steps to ensure the clients are qualified and not just sitting on a rate hold.
    Ron McClenaghan

  2. Buyers are liars. If he simply said yes instead of being an a**hole he would have seen the listing he was interested in. How would you know otherwise? On the flip side i’ve had a buyer tell me they are pre approved to find out the mortgage broker misled them.

    Just recently I met a nice young couple who were not pre approved, they were first time home buyers and very uneducated about the process but they loved one of my homes. I helped educate them on the process, hooked them up with a broker and provided a lot of great advice I wish I had for my first home. We’ll see how this all turns out over the next days but i expect things to work out for them.

    Perhaps a quick face to face meeting with these potential buyers would have gotten them to open up as to why they are moving as well as if they are pre approved.

  3. Mike, the need for more face to face meetings with clients, especially new clients is becoming quite essential. It’s important all of us as parties to the relationship get the full picture. Fraud runs wild in Alberta and straw buyers are out there trying to take advantage of both Realtors and Mortgage lenders. The work put in at the front end by a good Broker will determine the clients are legit and have them “qualified” to make a purchase.

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