The Four (4) Most Common Myths Regarding Mortgage Pre Approval

• October 16, 2015

We often hear from our clients that pre-qualifying mortgage agreements are quite hard to fully comprehend. And rightfully so!

People tend to think it is the same structure as a pre-approved loan, but in fact – a pre-qualified mortgage agreement is simply an estimate of your affordability (ie – how large of a mortgage can you qualify for based on several specific criteria; one example being your financial records over the past few years).

“It’s important because it helps you narrow down your options and focus on how much house you can really afford,” quotes Erin Lantz, who is the director of the Zillow Mortgage Marketplace. “But it’s not a commitment between you and the lender whatsoever.”

Here are four (4) myths regarding pre-qualified mortgages:

1) You Are Applying For A Loan
As mentioned above, many home buyers often think that pre-qualified mortgages are actual loans. They are not! They are simply estimates to help you assess how much you can borrow from the actual loan institution.

2) No Need to Qualify the LENDER
Just because you did your homework and went through the pre-qualification process to determine your mortgage, this doesn’t mean that you shouldn’t conduct the same due diligence when choosing the financial loan institution.

3) You Don’t Have to be Prepared
Just like the actual lending ($) process, you need to have all your ducks in a row when meeting with a mortgage pre-qualifier specialist.

The more paperwork you can provide, the more accurate the specialist can be in determining exactly how much of a mortgage you can afford. Some examples of the items you will need to bring in would be – pay stubs / proof of employment; recent credit reports; and your personal tax returns (T1 / T4) for the past two (2) years.

4) I Can Stretch the Truth Just a Bit
Absolutely not! You want to be completely up front and honest with EVERYTHING in your recent financial history. If you make up the numbers (or conveniently forget to mention some), the truth will eventually be found out – and you will risk losing your mortgage altogether.

“Your goal is to show your financial picture has remained consistent over the past two years,” quoted Lantz. “You want to keep your profile in tip-top shape.”