Before you make an offer to buy a home, we recommend you apply for a pre-approval mortgage and get a commitment letter from the lender if it’s possible. This will reduce your risk to get final mortgage and the time after your offer accepted. Usually, the time of removing condition for residential purchasing agreement is scheduled only 5 ~ 7 days. If you have got a pre-approved mortgage, this will only take about 1 to 2 business days to receive a final commitment from your lender, and then you will have enough time to arrange the home inspection. Otherwise, you may waste the home inspection fee if the lender finally says “NO”. On the other hand, from seller’s point of view, pre-approved mortgage will increase your competition, especially when multi offers happen. Because the seller won’t expect his/her home on an unknown realistic buyer.
The pre-approval mortgage application is almost the same as formal mortgage application. It’s just a conditional commitment of lending money for the borrower. The major condition is the home you want to buy is insurable, resellable and the price is not abnormal comparing its neighbors in similar location. If nothing is abnormal, after your offer is accepted, your lender will approve your final mortgage without any hesitate.
The application typically consist of the following:
- Personal information
- Employment history
- Income details
- Assets you have
- Liabilities you have
- Amount of mortgage finance requested
- Permission to collect and use your Credit Information
- Privacy disclosure
If it’s bank, the mortgage underwriter of bank MPC (Mortgage Processing Centre) will evaluate your application. If you apply for it through a mortgage brokerage, the agent will get your credit report to analyze first, then will forward all your application and credit report to several lenders. The underwriters of MPC will evaluate your application. The lenders will accept the copy of credit report from agent. So, only one credit check could be to all lenders. Your credit score won’t influence at all. But if you apply for it in different banks, each bank will check your credit. Your credit score may be changed for many credit check requested during a very short period.
All mortgage underwriters will mostly focus on:
- Your Credit History: credit report and credit analysis
- Employment Earning & History: analyze your job stability
- Affordability: calculate the GDS and TDS ratio
- Net-worth: analyze your net-worth of your total assets and liabilities
If all are under lender’s policy, you will be approved for this pre-approval mortgage. You will receive a commitment letter which includes mortgage amount approved, term, mortgage rate, holding period (expiring date) etc.
After you have this commitment, you can search your home. After you make an offer, you can tell the seller that you have already been approved the mortgage of how much amount. This can reduce the financial concern to the buyer.
Regarding the GDS and TDS, please read page “Self Evaluation“.
For Pre-approval Mortgage, click HERE to apply for.
