6 reasons to get pre-approved

6 reasons to get pre-approved

As a real estate agent in Toronto, I work with a lot of first-time home buyers who don’t know they should be getting pre-approved before they start their search. I tend to educate them about that pretty quickly because having your financing in place can be the difference between a deal and no deal in a multiple offer situation. But there are plenty more reasons why you should check in with a mortgage broker before you start looking.

1. It’ll help you get real about what you can afford

How do you really know what you can and can’t afford? Online mortgage calculators can give you a ballpark idea based on your income, but they don’t take all the important factors into account - like how much debt you have. In fact, people often don’t even know themselves how much debt they really have. When they’re crunching the numbers, most don’t think of the $200 a month that’s going towards that financed couch from the Brick, or the monthly payment on their car. But every bit of debt impacts what a lender will be willing to let you borrow.

When you go to a mortgage broker or lender to get pre-approved, they go through your credit with a fine-tooth comb. They’ll ask about things you haven’t thought of, like credit card debt, line of credit, student loans and financed purchases. A lot of my clients have found it very eye-opening – most have more debt than they realized.

2. It’ll save you time and hassle

If you’re not pre-approved, visiting properties is like swimming with one arm tied behind your back. Having your financing in place shows you’re serious about buying and aren’t just being a real estate tourist. Plus, it gives you an exact idea of what you should be looking at and where, which means you avoid seeing a bunch of places that aren’t for you.

3. It narrows down your search

Maybe the pre-approval shows that a 2-bedroom isn’t in the cards for you right now, so you’ll know you should be focusing on 1-bedrooms or a 1-plus-dens. Ultimately, having this information before you start looking will help you avoid the inevitable disappointment of falling for a place you can’t afford. As an agent, I’m not here to show you things that are out of your reach: I’d rather have you fall in love with a home that’s attainable. That way, everyone wins.

4. It gives you a competitive edge

We’re in a hot market where there’s very little inventory, but lots of buyers - which means you could be competing with upwards of 20 other potential buyers for one property. That means you need an edge. If you have to go back to your bank and ask “can I get a loan for this amount,” you’re out of the running, because the winning bid will be the firm one that’s already been pre-approved. Guaranteed.

5. It tells you how high you can go

Multiple offer situations can get pretty intense, and knowing exactly how high you can go without getting carried away in a bidding frenzy is really important. You may have set your budget at $500K, but then you get into the fray and decide to offer $580K and not worry about the consequences...until you lose the house (and probably your deposit) when the bank says no. Being pre-approved means you know exactly how high you can go and how much wiggle room you have in a bidding war.

6. It makes you a more desirable buyer

Sellers like firm offers. That’s just a fact of life. If your bid is close to someone else’s, the seller is a lot more likely to go with the firm offer.

So bottom line? If you’re serious about buying, get pre-approved, stat. In this market, you need to have financing in place before you can get an offer going. But going through the process also tells you how much you can afford, manages your expectations – and sets you up to find (and buy!) a condo you’ll love.

Katie Hutchinson

Katie is an experienced Condo Pro specializing in properties in the 416.

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