Did you know that many banks and trust companies will allow you to apply for a mortgage before you've even found the home you want to buy?
There are a number of ways that you can go about getting a pre-approved mortgage. You can apply in person at a bank or trust company branch, or many banks and trust companies let you make an application over the telephone, by faxing in a completed application form or even by completing an application on-line. Some banks and trust companies offer an on-line calculator to help you estimate the maximum mortgage amount you may qualify for.
As part of the pre-approval process, the bank or trust company will look at your income and expenses and your assets and debts in order to decide how big a mortgage you can afford to repay. We recommend that you do some careful calculations before you decide to accept all of the mortgage money that they may be willing to lend you – you still have to eat and put gas in the car after you make your monthly payment.
Our book the Complete Guide to Buying, Owning and Selling a Home in Canada takes you through those calculations step-by-step.
If you qualify for a pre-approved mortgage, the bank or trust company will tell you the maximum amount of money that it is willing to lend you and will guarantee you an interest rate, so long as you buy a suitable home within a fixed period of time – usually 60 days for a resale home and 90 days for a newly built home. It will not give you the money until you buy the house, and the actual amount of the mortgage will depend on the value of the house you buy. Once you find the house the bank or trust company will want to inspect and/or appraise it before making the mortgage money available (they can do this quickly; some promise to do it within 24 hours).
There are a number of advantages to getting a pre-approved mortgage: