5 Mar, 2020
how to get approved for a home loan

If you’re wondering how to get pre-approved for a home loan, you’re in luck, because it’s a pretty simple process. On the other hand, determining what type of home loan you are trying to get approved for takes some expertise. First, we must first figure out what type of lender will you qualify under. Most applications for a home loan start with a bank or credit union, but what if your application doesn’t fit under these strict guidelines? A mortgage broker can help navigate what types of home loan lenders would work best for your application. Continue reading to learn everything you need to know about pre-approvals for home loans.

Types Of Pre-Approvals For Home Loans:

  • Purchase pre-approvals
  • Refinance pre-approvals
  • LOC pre-approvals
  • B-lender mortgage pre-approvals
  • Home Equity Loan pre-approvals
  • Private mortgage pre-approvals

What Is Required For a Pre-Approval?

A mortgage pre-approval is a promise from a lender (primarily a bank or credit union) to borrow up to a specific amount of money at a specific interest rate subject to you meeting certain income, asset requirements and a property appraising to verify lending value.

A pre-approval for a home loan will take into consideration your credit and income. The types of income can vary based on your employment type, which determines what documents and assets you will need to submit. If you have a Salaried Income, this means you would generally submit a job letter and paystub along with your NOA notice of assessment. If you receive commission, bonus, or overtime income, two years of T4’s will be required.

For more complex income types such as self employment income, if you have any write offs or other benefits, then additional documents will be required:

  • 2 years T1 General
  • 2 years NOA
  • 2 years of company financials (if incorporated)

In addition to the above, other assets will also be required. Assets can include automobiles, RRSP, GIC, Stocks/Bonds as well as personal assets like tools, jewelry, art, etc. Learning about how to get pre-approved for a home loan is the most important first step, because you need to know what is required depending on your unique situation. We want to get you pre-approved on the first try.  

how to get pre approved for home loan man woman looking at their documents

What Is The Difference Between Pre-Approval & Pre-Qualification?

A pre-qualification and a pre-approval for home loans differ in the documented proof required in a pre-approval. Pre-approvals look at your verified income and credit along with the amount of debts you hold. Once you have been granted a pre-approval for a mortgage loan, you are issued a commitment with subject to meet with documented verification and appraisal values.

A pre-qualification just calculates how much you may be qualified to purchase without looking into income, credit or assets.

Pre-Approval B-lender

A home loan pre-approval from a B-lender differs from other banks and credit unions mainly because they will not fully underwrite a file for pre-approval. Because of this, you must work with a broker to make sure you have as much of your income and credit details worked out prior to submitting an offer to purchase for a home. 

B-lenders will look at a full application with all income and credit documents as well as a contract to purchase an offer. The pre-qualifying for B-lender financing is more uncertain than qualifying at a conventional bank or credit union. 

The biggest difference is B-lenders have unique products for income and credit that traditional lenders don’t offer.

Home Equity Loan Pre-Approval 

So, how do you get pre-approved for a home equity loan? We have good news for you. In most cases, home equity lenders do not offer pre-approvals. This type of financing is considered “common sense financing”, so it is easier to qualify for. Since the home is the focus for security, lenders will look at live deals only. An experienced mortgage broker can help underwrite an application to better position for a file for approval. Brokers can work through your application and provide you with options based on several different Loan-To-Values. Home equity loan rates are based on Loan-To-Value. These Loan-To-Value rates are triggered at LTV’s starting at < 50% – 75%. An experienced broker will be able to give you an estimate of rates/costs for each of these LTVs.

Pre-Approvals With a Private Mortgage Lender

Pre-approvals with a private mortgage lender are, again, case by case. Private lenders typically only approve live applications. In some cases, it’s possible for a private lender to obtain a pre-approval, but it will be subject to more than just the value of your home. Many times, the lender will want to see valid comparable property as well as a narrow scope of comparable sales. This is primarily due to private lenders (most commonly home equity loan and HELOC lenders) not qualifying for CMHC insurance. This means that if there is an error in the value of the property, the loss is not covered by insurance. 

Get a Free Assessment

So, you’re still wondering how do you get pre-approved for a home loan, and not sure of the next steps? Give Jeff Di Lorenzo a call today, or get in touch through our contact form for a free assessment of your situation. We’ll help you get the loan you need the first time around.

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