3 Common Mortgage Questions Answered
When it comes to mortgages, sadly, we don’t learn about this stuff in school. It’s up to us to do our research and figure out the answers on our own. To help make things easier, we thought we’d answers some of the most common mortgage questions Canadians have.
Why should I get a pre-approval mortgage?
If you’re serious about buying a home, a mortgage pre-approval is a must-have. A mortgage pre-approval is a lot more thorough than a mortgage pre-qualification.
A pre-qualification enters some numbers into a mortgage calculator and spits out some results. Meanwhile, a pre-approval looks at other important factors, including your income, down payment and credit. These are important factors, as an issue with any one of them could cause problems with your mortgage approval later.
A pre-approval gives you that added confidence that you’re financially prepared to buy a home. Your realtor may also ask you for a copy of your pre-approval before taking you to view properties, so it’s important to have one in hand.
If I get a mortgage pre-approval, do I still need to include the condition of financing?
That’s a great question. Many people who get a pre-approval mortgage assume that they no longer need to include conditions of financing. While a mortgage pre-approval certainly helps, it doesn’t guarantee mortgage financing. For that reason, you might still consider including the condition of financing.
While a mortgage pre-approval looks at your income, down payment and credit, one factor that’s unknown until you have an accepted offer on a home is the property itself. There’s no way for the lender to sign off on the property until you have an accepted offer.
For that reason, you might want to consider including the condition of financing; however, that may not be possible in some markets. You can help protect yourself by getting a home inspection ahead of time to make sure you’re buying a solid home.
Do I need to pass the mortgage stress test if I’m renewing my mortgage?
That’s a good question. It depends.
If you’re renewing your mortgage and making no changes and staying with the same lender, no, you don’t have to pass the mortgage stress test. However, if you are making changes to your mortgage (i.e. refinancing it) or switching lenders, that’s when you’ll need to pass the stress test.
You may think that rule is silly. If you stay with your current lender, you won’t have to pass the stress test, even if your mortgage payment is higher than if you switched lenders and stretched out your amortization period to lower your payment, but those are the rules as they stand.
Even if you’re switching lenders and not making any changes to your mortgage, you’ll need to pass the stress test. That’s why it’s a good idea to speak with a mortgage expert in advance to make sure you can pass the stress test. Otherwise, you’re wasting your time looking into mortgage options if you can’t pass the stress test at a new lender.
The Bottom Line
Do you have more mortgage questions that remain unanswered? Speak with your mortgage experts today to get to the bottom of your unanswered questions.