The market is starting to pick up after several months of interest rate uncertainty. Earlier this month, the Bank of Canada held interest rates steady, following eight rate hikes in less than one year. Now buyers are ready to re-enter the market.
When your clients have found a property that excites them and are ready to make an offer, you want them to be competitive.
Pre-qualification is a pre-emptive step in the homebuying process. It gives a borrower a rough estimate of the loan amount they may be able to secure but does not guarantee it. No credit check is done, and no extensive application is filled out. A pre-qualification may be better for someone who is casually shopping but doesn’t plan to purchase a home for several months. It may also be better if your client is worried about their credit score.
The best way to do that is for buyers to be pre-approved, not just pre-qualified. These terms have been used interchangeably, but there is a big difference.
Pre-approval, on the other hand, is a full-fledged mortgage application where lenders look at income, employment, debt and assets. A full credit check is done. A pre-approval is good for three to four months and can help your client be ready to close on a purchase faster. But remember, a pre-approval doesn’t necessarily translate into a mortgage. The lender needs to consider the property itself, all the terms, and the documentation before a pre-approval becomes approved.
In a market with an increasing number of multiple offers, a buyer who is pre-approved Is in a stronger position to complete the transaction.
Source: Professional Standards