Should I Get Pre-Approved for a Mortgage and Why?

You may have heard that this thing called the ‘mortgage stress test’ was due to come into effect on January 1st. But now that it’s here, do you understand what it means to you? Well, if you’re thinking of purchasing a home in the near future, you may be surprised at the impact the new rules have on how much house you can afford. You might be asking the question ‘Should I get pre-approved for a mortgage?’

The quick answer is yes. Not knowing exactly how much you have to spend can put a serious damper on your house-hunting efforts. A mortgage pre-approval is more important now than ever. Even if you’ve been pre-approved in the past, the amount for which you qualify has likely changed. In order to avoid a surpris , it’s helpful to be armed with all of the facts.

In this post, we’ll explain the main points you need you know and what you can do to prepare yourself for the mortgage pre-approval process. Let’s jump in!

1. The Stress Test Is in Full Effect

The new rules mean that you will have to prove to the bank that you can support the monthly cost of your mortgage at a higher rate than it’s at today. This is regardless of how much money you have saved for your downpayment. Lenders want to make sure that you’ll be able to comfortably afford your payments in the event that mortgage rates increase in the future.

2. You Can Easily Find Out the Impact on Your Amount

Thankfully, it’s easy to find out how the stress test impacts you. Many  lenders and mortgage brokers offer quick tools to help you understand how much mortgage you can afford. One of our favourites is a tool offered by Invis. In 5 minutes you can get a good estimate of how much you can afford. You can link to this tool here

3. You Should Know Your Amount Before You Search

One thing worth driving home is that it makes sense to know how much you can afford before you start searching for a house. You want to make sure you’re looking at houses within your budget. It’s a horrible feeling when you find your dream home only to realize later that it’s simply unattainable.

4. You May Need to Compromise

As mentioned, unless your income has increased or you’ve acquired some additional equity, the amount you qualify for now is lower than it would have been last year. You may have to adjust your search by prioritizing what is most important and compromising on other things. Perhaps you can look at a different neighbourhood, a smaller home, or a property that needs a few more renovations.

5. An Excellent Local Realtor Can Help

Even if it feels like the new rules have negatively impacted your search for your dream home, it isn’t all bad. Remember that they are in place to protect consumers from overstretching themselves and landing on financial hardship down the road. Plus, with the right realtor by your side, there’s no need to settle. Someone with local knowledge and a proven track record can help you find the home that’s right for you.

Hopefully, we have helped answer your question of ‘Should I get pre-approved for a mortgage?’. Do you need more help understanding the mortgage pre-approval process? As always, your ThompsonSells team is here to help every step of the way!