Get Pre-Approved for a Mortgage

1. Check Your Credit Score

• Before applying for pre-approval, review your credit score and history. A higher credit score means better mortgage rates.
• Aim for a credit score of 650 or higher for better loan terms.
• Get a free credit report from Equifax or TransUnion in Canada to check for any errors or issues that need resolving.  You may also be able to get your credit score online with your current bank account.

2. Calculate Your Debt-to-Income Ratio

• Lenders look at your debt-to-income ratio to assess whether you can manage mortgage payments. The general rule is that your monthly housing costs should be no more than 32% of your gross income.
• Calculate this ratio by dividing your total monthly debt payments (including mortgage) by your monthly gross income.

3. Compare Lenders/Get a recommendation for a good mortgage broker

• You can approach multiple banks, credit unions, or mortgage brokers to find the best mortgage rates.  These rates will depend on a variety of things, including your credit score.
• Ask about pre-approval options and compare interest rates, loan terms, and any fees.
• Your realtor may be able to provide recommendations to a lender/broker.

4. Gather Necessary Documents

• To get pre-approved, you’ll need to provide several documents which may include:
• Proof of income (pay stubs, T4s)
• Proof of assets (bank statements, RRSPs, savings accounts)
• Employment verification (letter from your employer)
• Identification (driver's license, SIN)
• Details of your debts (credit card statements, car loans, etc.)

5. Submit for Pre-Approval

• Once you've gathered the necessary documents, submit them to your chosen lender.
• The lender will assess your financial situation and give you a pre-approval letter that shows how much you can afford to borrow.

6. Benefits of Pre-Approval

• Knowing your budget helps you search for homes within your range.
• It strengthens your position as a buyer, making your offer more attractive to sellers.
• Pre-approval typically locks in your mortgage rate for 60-120 days, giving you time to find the right home without worrying about interest rate changes.

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