What is Pre-approval and Why is it Important in Today’s Market?
As we know that GTA’s housing market is hot with rapid changes in prices and demand, it can be really challenging to find a home and get it approved. During this process, you must have come across the term “pre-approval” and wondered what that actually means in the real estate market. Let’s clear out the confusion!
Pre-approvals in the Real Estate Market
What Are Pre-approvals in Today’s Market?
In simple terms, Pre-approval means that a potential buyer does not have to wait until he or she is qualified by the bank to buy a home.
This is beneficial for two reasons: first, as mentioned, it saves time as a pre-approved buyer doesn't have to go through the lending process before they can start looking for a home. Second, pre-approval gives buyers an opportunity to be more selective about which homes they want to see. As they know that there is at least one bank ready and willing to loan them money, they can choose more selectively from among available homes on the market.
The point of this term is that buyers are approved for a mortgage before even going through the stringent qualification process of banks and lenders. This decreases the chance of making an emotional or rushed purchase, which can lead to costly mistakes.
Getting Pre-approvals: The Process
The GTA pre-approvals process is a tedious one, but necessary. It can take up to 2 weeks before the bank approves the loan.
The process involves filling out an application and getting information about your income and credit scores. You'll also need to provide documents that provide proof of income and residency, along with bank statements and tax returns if applicable. This will give the lender an idea of how much they should lend to you, based on your past history of borrowing money, as well as how much risk they are taking on by approving you for a mortgage.
Importance of Pre-approvals in Today’s Market
The Toronto Real Estate Board (TREB) reports that the number of pre-approvals for home purchase has increased by 20% in the last year. The increase in pre-approvals is a reflection of the growing positive sentiment and growth in the Canadian economy.
1. For home buyers, obtaining a pre-approval is very important because it determines the maximum loan amount that they are eligible for. It also saves them time and energy that would otherwise be spent on credit checks.
2. The importance of having a pre-approval in today's real estate market is twofold: it saves home buyers time when they are looking to purchase a home by providing them with an instant answer, and it prevents people from spending time on credit checks when they know that their loan will not be approved.
3. Pre-approvals can help buyers better negotiate with sellers by showing that they are already approved to take out a loan.
4. It also provides buyers with greater leverage when they are trying to obtain financing for their home purchase because lenders will know that they are serious about buying property and have the capacity to repay the loan.
Pre-approval is a great step in a well thought-out plan that makes real estate investment not only easier, but more secure. My expertise lends that kind of knowledge and planning to my clients. If you’re looking to invest and want to seek out pre-approval loans, as well as having a safe plan, contact me today and let’s talk about how we can make your vision come to life.
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