Beware of the term PRE-APPROVAL!
Here are some facts:
- Pre-approvals mean something different to every mortgage professional and lending institution
- For mortgage approvals both the applicants AND the property they are buying need to be adjudicated and approved before funds are advanced…detailed borrower information and documents are typically required for a full pre-approval, however property info is seldom available. For this reason a full blown adjudicated pre-approval is very difficult to obtain
- Many lending institutions will not adjudicate pre-approvals, and many others charge rate premiums to do so
- Applicants’ assets, liabilities, and income need to be verified in writing before a mortgage can be approved…many mortgage agents don’t even pull credit or verify employment and down payment before issuing a pre-approval
- For a high ratio mortgage (less than 20% down), both the lending institution AND the default insurer must approve the lender and the property…default insurers will only adjudicate live applications
- Rate holds and pre-approvals are different everywhere…rate holds seldom include any form of verification or viewed documents
- In a rising interest rate environment, a previous pre-approval may no longer be acceptable due to excessive debt service ratios based on the current higher rate
- For very long closings over 90-120 days, assets, liabilities, and income may need to be fully verified again prior to closing
- Approved mortgage amount is always based on the lesser of the purchase price OR the appraised value…any shortfall from an appraisal needs to be made up by the client
We here are Dominion Lending Centres can help sort through this minefield, and provide you with meaningful feedback and information for your mortgage needs.
Thanks to my DLC colleague Tom Neeb for this article.