Get Pre-Approved for a Mortgage in Ontario
Here's how to get pre-approved for the highest mortgage amount possible.
This is a step-by-step guide to getting pre-approved for your mortgage in Ontario while getting the best deal, and for the highest maximum mortgage amount!
What Is a Mortgage Pre-Approval?
When you’re shopping for a mortgage, getting a mortgage pre-approval is an excellent place to start.
A pre-approval lets you know how much you can afford, and what your future mortgage payments could be under that potential future scenario.
Getting pre-approved for your mortgage allows you to know exactly what price range you should be looking in, and the absolute maximum you make your offer to purchase at.
When getting your pre-approval we can also do a 120-day rate hold at that time to protect you in case rates increase while you’re looking for a home.
Pre-Approval vs. Pre-Qualification
The terms pre-approval and pre-qualify are often used interchangeably to mean the same thing.
To be more specific however, a pre-qualification is simply an estimate of how much mortgage you qualify for.
Pre-approvals, on the other hand, involve the review of income documents, proof of down payment documents, and credit bureau information.
Some lenders also allow for 120-day rate holds to be set at the time of the pre-approval.
Why Get a Mortgage Pre-Approval?
Before searching for a home it’s good to first know what price range you should be looking in and the details of your future mortgage financing.
Some Realtors insist that you are already pre-approved before they will take the time to show you properties.
Nothing is worse than finding the perfect home and missing out because you didn’t have your mortgage financing arranged, or worse; discovering it’s not actually within your budget.
Having a mortgage pre-approval and knowing all the numbers will also make you more comfortable and confident throughout the process of looking for your home and making an offer to purchase.
If rates go up during your search for a home, a 120-day rate hold can help save you a significant amount of money. If rates go down after your rate hold is in place, you'll get the new lower rate. Therefore, anyone who is serious about buying a home would benefit from a 120-day rate hold.
Requirements for a Mortgage Pre-Approval
To get a mortgage pre-approval you need to provide us with your mortgage application information and supporting documents.
Mortgage application information can be provided easily through our online application or over the phone.
The information you will provide on the application includes:
- Your mortgage goals
- Current address and address history
- Employment / Income information and history
- Assets (savings, investments, vehicles, etc.)
- Liabilities (credit cards, lines of credit, loans, etc.)
- Properties you currently own and mortgage and property tax details
The documents needed for your mortgage pre-approval include the following:
- Proof of income documents (example: Letter of employment, paystub, recent T4s)
- Proof of down payment documents (example: recent bank/investment account monthly statements)
- Supporting documents for properties you currently own (if applicable)
We will let you know what documents we need from you once we receive your mortgage application information. The documents we need will depend on the information you provide.
Does Getting Pre-Approved for a Mortgage Affect Your Credit Score?
Getting pre-approved for a mortgage does not affect your credit score.
Part of getting pre-approved does include having your credit bureau reviewed however, this does not negatively impact your credit history or credit score.
What lenders care about when it comes to credit is your history of making payments on time, how thick your credit is, and that you do not have any outstanding collections.
Also, when we do the pre-approval your credit bureau only needs to be pulled once.
Qualifying For a Mortgage In Canada
To determine your maximum mortgage amount, we/banks/lenders look at two ratios (Gross Debt & Total Debt Service Ratios) and your overall credit.
Insured mortgages can be amortized for up to 25 years with as little as 5% down on the first $500K purchase price and a 10% down payment on the amount above $500K.
If you put less than 20% down, the mortgage will be insured by CMHC, Sagen or Canada Guaranty. The insurance premium added to the mortgage varies depending on the amount of the down payment.
Qualifying for mortgage financing means your ratios have to be as per the government and lender guidelines - no higher than 39% for the gross debt service ratio ( GDSR) and 44% for the total debt service ratio (TDSR). This is the most common rule; however, some lenders require lower figures, depending on the credit score. There is also some leeway on the TDSR.
No insurance premium is added to a conventional mortgage (20% down or more), and can be amortized over 30 years.
This keeps your payment lower and increases your purchasing power.
The rate used to look at your ratios is called the "qualifying rate" or the "stress test" rate'. It is 2% higher than the rate you receive.
Some Credit Unions allow a lower qualifying rate for conventional lending ( 20% down payment). In this case, the qualifying rate is the same as the rate you would receive. This can allow you to qualify for a higher maximum mortgage amount.
The Gross Debt Service Ratio: is the household income divided by the mortgage payment, property tax, Heat, and 50% of condo fees if applicable.
The Total Debt Service Ratio includes all the Gross Debt Service ratio items plus monthly debt obligations. 3% of the balance is used for credit cards and unsecured lines of credit. The balance or the limit of a secured line of credit ( HELOC) is amortized over 25 years at the stress test rate compounded monthly.
There are many rules around income. In many cases, a two-year average is used.
How to Get Approved for More
Getting pre-approved for the most possible depends on what lender you go with and how experienced your mortgage broker is.
Different lenders have different guidelines which result in different amounts they can pre-approve you for. The trick to getting pre-approved for the highest mortgage amount possible is to choose the lender that is the best fit for your situation.
Different lenders also have different ways of looking at and using income on an application and the exceptions they will allow.
Our mortgage brokering experience since 1999 allows us to get you pre-approved for more. We have strategies for getting you pre-approved for the maximum possible and we know which lenders are the best fits for different scenarios, including for self-employed people.
Talk to us if getting pre-approved for the maximum amount possible is important to you. We can help!
Pre-Approval vs. Approval
Once you have found a property and have an accepted offer to purchase, your application will be submitted to the chosen lender, this time with the property details included in the application.
The lender will then provide us with your mortgage commitment, which is often referred to as your mortgage approval.
Your mortgage commitment from your lender will include all of your mortgage approval conditions, which may include an appraisal. If an appraisal is required we will order the appraisal at this stage.
Depending on how long it has been since we did the initial pre-approval and collected documents from you, we may need to collect some more recent documents such as your most recent paystub or most recent bank statements.
What to Consider During the Pre-approval Process
Your pre-approval is based on the information provided in your mortgage application so material changes can affect your pre-approval.
Before making any significant changes to your financial situation, you should discuss them with us first.
Examples of changes that will significantly impact your pre-approval would include if you were to change employers or take on a new liability like a new lease or loan.
Mortgage Broker vs. Bank
Working with a mortgage broker is free, easy, and saves you time and money.
As of 2019 brokers originate 47% of mortgages in Canada, an increase from 23% in 2003. This means Canadians are recognizing the benefits and the savings you get from using a mortgage broker.
Banks are limited to only offering you their own mortgage products and biased advice, while we, as your mortgage broker, have the freedom to check with all lenders to get you the best rate for your situation.
Dominion Lending Centres is one of the largest Mortgage Brokerage Companies in Canada, and because of this, we get access to large volume discounts that we pass on to you.
Sometimes we can even get our clients better rates from their own banks than what they can be offered at the branch.
We work for you, not the bank. And you get unbiased advice from an experienced mortgage broker that is dedicated to you.
- You do not need to change any of your current banking procedures when you use a mortgage broker.
- There is no need to drive out of your way for tedious in-person appointments - everything can be done over the phone and over email.
Bottom line: Your home purchase is one of the most important financial decisions you'll make, and getting professional, unbiased advice from an experienced mortgage broker makes sense.
It's free, it’s easy, and it saves you time and money.
How to Get Pre-Approved for a Mortgage Right Now
The easiest way to get pre-approved right now is by completing a mortgage application with us using our secured online mortgage application or over the phone.
Press the get started button on this page and enter your information. We will connect with you right away by email and phone. Or if you prefer to call and speak right now, call us, and we can start by discussing your goals.
We look forward to having you as a valued client and working together for many years to come. Talk soon!
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