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MORTGAGES 101
A beginner’s guide to financing your home
The Importance of Pre-approval
As soon as you’ve decided you are interested in purchasing a home, sit down
with a mortgage professional to discuss how much credit you can expect
to receive. This initial discussion can lead to one of two outcomes: pre-
qualification or pre-approval.
Pre-qualification is a non-binding assessment of the buyer’s credit,
income, and assets which allows the mortgage broker to provide an
estimate of the loan amount the buyer will qualify for. Based on the
buyer’s self-reported information, a pre-qualification is neither checked
for accuracy nor guaranteed.
Pre-approval on the other hand, usually entails actually pulling the buyer’s
credit report and examining all the pertinent documentation. Valid for a
limited time period (typically 120 days), the pre-approval letter confirms how
much credit the buyer will qualify for, and at what interest rate.
While a pre-qualification can give you a general idea of whether you can
afford to buy, most agents won’t show you houses without a pre-approval
in hand. A seller’s agent cannot in good faith present an offer without a pre-
approval letter from your mortgage lender.
Keeping your Paperwork in Order
As a prospective home buyer, you will want to start keeping your finances and
paperwork in order long before you start house-hunting. The loan amount
you will qualify for when applying for a mortgage depends on a number of
factors, including income, assets, debt, and credit rating.
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