Applying for a mortgage pre-approval typically requires you to gather documents related to your finances and providing them to your lender. Depending on the lender, these documents may include:
- Name of your employer, length of employment, and current salary
- Annual salary or wages for the household
- If you are self-employed, earnings for the past two years
- Annual earnings from commissions, bonuses or tips
- Annual interest and investment income
- Child support or alimony received for current and previous year
List of assets (bank accounts, RRSPs and other investments; major personal assets, such as jewellery, car, collections)
Details of liabilities (amounts owing on credit card balances, student loans, car loans, personal lines of credit, other debts, or monthly payment obligations).
Lenders will check your credit report to assess your financial situation. Make sure your credit report is accurate by obtaining your own copy through Equifax (1.800.465.7166) or TransUnion (1.800.663.9980). To ensure accuracy, request a report from each agency. Most reports have at least one error in them.
By following these simple tips, you will be well-equipped to glide through the loan application process:
1. Know about different loan programs available
It is important to understand the differences between the various mortgage programs available to you. You should also be aware of the advantages and disadvantages of fixed mortgage rates and variable mortgage rates.
2. Lock in the interest rate or let it float?
If you decide to lock in your interest rate, you are committing to a set interest rate throughout the term of the loan. If you decide to let your interest float (variable rate), the interest rate you pay will fluctuate up or down depending on current market conditions. Historical data indicates that variable mortgage rates have been the best choice for consumers.
3. Shop around
Do not rush into anything you are not sure about. Take your time to study your options and decide which package suits you best. The last thing you want is to find out that you could have obtained the same loan from another lender at a lower interest rate.