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Even if home ownership is still just a vague glimmer on the horizon, the first step in every buyer’s home-hunt should be heading over to their bank and getting pre-approved. We recommend this even before setting up a Centris alert, and definitely before scheduling any visits or open houses. Here’s why:
A pre-approval determines your exact buying capacity
There’s no worst feeling than finding your dream home, setting your heart on it, and then realizing you can’t afford it. Finding out exactly how much a bank would be willing to lend you prevents you from wasting your time looking at properties above your budget, and will steer you away from potential heart-ache down the line. Don’t forget that a pre-approval is not based solely on your salary, but on a range of different financial elements such as your debt to income ratio, your credit score, and the stability of your income over the past three years. So the amount you think you can afford is not necessarily the amount the bank will lend you. Play it safe and know your exact budget before you start swooning over homes on Centris and/or Duproprio.
It locks you in at the lowest interest rate
If you’ve been watching Montreal’s interest rates over the past few weeks, it’s clear to see that they’re on the rise. The 2.14’s of August are long gone, and rates are slowly but surely sneaking back up past the 2.5’s. Getting a pre-approval secures the best term for your financing for a predetermined duration, varying from 45 to 90 days depending on your bank. If the interest rates spikes while you’re looking for a home, yours won’t be affected. And if they drop, you’ll still be able to cancel your terms and benefit from the lower rate. It’s a win-win either way.
It strengthens your offer
In a bidding war, sellers will always favour a pre-approved candidate, even if their bid is slightly lower. By having a pre-approval on hand when you put in an offer, you reassure the seller of your commitment by having already taken the first step. This is especially relevant for hot deals- properties that are below market value or that offer an incredible value for price. These listings usually only stay on the market for a couple of days before being swooped up by investors. If you’ve had an alert set up, you’ll be notified of these deals as soon as they hit the market, but you’ll be at a considerable disadvantage if you have to wait to get your approval before putting in an offer, or if you’re bidding against investors that have already been approved.
All in all, requesting a pre-approval is easy, non-binding, and free.