Why Do You Need Mortgage Pre-Approvals?
Mortgage pre-approvals are a boon especially when interest rates are rising. They are a means to know your borrowing power, yes, but more importantly they can provide you a hold on the interest rates for up to 120 days. When the rates are declining you may not need to look at mortgage pre-approvals but when rates are steadily rising, these mortgage pre-approvals are your best friend if you are in the market looking for your dream home.
Those who have a fixed-rate mortgage which is pre-approved are indeed very lucky when the rates rise as if your mortgage is funded within the stipulated time period of your pre-approval being valid, the lender must honour the pre-approval rate. It also benefits those who have variable rate mortgages. In light of the last month when fixed rate mortgages saw rate hikes, it is important to know how pre-approvals can benefit you. You may wonder what are the benefits of a mortgage pre-approval? We list down some of them for you:
Protection against high rates of interest: This is valid during the pre-approval period. Everybody else will be paying a rate higher than the one your mortgage was pre-approved at. But if the rates have fallen, you would benefit from that too!
Awareness of borrowing potential: When you are out in the market to buy a home you ought to know about your borrowing power. If you like a house which does not meet your budget things can go very wrong. But if this happens and you are aware of your borrowing power, you have some options such as sourcing a down payment which is bigger. Alternatively you could also make one of your family members to co-sign the mortgage application.
Credit check and document review: When your mortgage is pre-approved your credit would have been most likely checked and all your documents may have already been reviewed. If not, you must reach out to your lender and ask for the same. When you are looking for a house and want to make an offer on a particular home, your mortgage broker can answer the details about the payment for that property. This may not ensure your mortgage getting an approval but the process is fast forwarded when your documents have already been submitted and credit check is already done during pre-approval stage.
Not all brokers or lenders offer pre-approved mortgages as only a small percentage of pre-approved mortgages fund with the person who pre-approved them. This small percentage gets bigger during times of rising rates. This is also the time when pre-approved rates are not available anymore. In our opinion, it is however totally worth it to get a pre-approval on your mortgage during the times when rates are rising. You can get yours pre-approved with us!
If you want to know more about how pre-approved mortgages are helpful or want to know anything related to mortgages, brokerage and more, do not hesitate to reach out to LendX.