Getting A ‘Credit Card’ For Your Mortgage
At a time in our market cycle when multiple offers are common and sellers are in control of the offer process, it’s more important than every to secure your financing commitment before you start going out to look at homes.
But there’s a misconception about what that secure commitment entails.
What many banks do when qualifying a buyer for a mortgage is to just ask a few questions such as, “What is your annual income?”, and, “What are your debts?”. Then they will give you one of two things... a verbal quotation on how much you can borrow OR a written “Quick Qualifier”.
The problem with both of these is that they are conditional upon three things... you supplying satisfactory proof of income & down payment and you having a satisfactory credit bureau score.
Basically you have nothing until all 3 of the bank’s conditions have been met!
The best way to proceed is to get what we call a FULL mortgage pre-approval. That means you immediately provide proof of income, proof of down payment and get the mortgage lender (banker or broker) to pull your credit bureau score right away.
You have to supply this information anyway so it’s very much to your advantage to provide it ahead of time.
Once you have full mortgage pre-approval in place it is just like having a credit card with a set limit to go and buy a house. Now you know yourself, that if you have a credit card with a limit of $10,000, you can confidently go out there and buy something for up to $10,000 without question.
It’s the same thing here - by getting that full mortgage pre-approval in place, it’s like having a credit card for a mortgage of up to say $700,000. If you add on the down payment that you have, let say $50,000, then you can count on being able to buy a home up to $750,000 purchase price.
It’s a tremendous value and confidence builder just having that mortgage ‘credit card’ in place so that you know for sure exactly how much you can purchase!
There are two major benefits to doing this ahead of time... First you now know without question exactly how large of a mortgage you can qualify for and secondly, there will be NO stress once you buy that your mortgage will not be approved. Just add on your down payment and you know the maximum price you can pay.
So let’s get started. I’ll just need a bit of preliminary information to start the process and then we’ll have a conversation about what comes next.