The air is cold, the ground is tough, the holiday season is through and enough is enough – it’s time to get your mortgage pre-approval! But why now, and not wait until the spring after-tax season?
The fact is, if you’ve waited until spring to get a mortgage pre-approval, you’re already late – and there are a few real estate market factors that will work in your favour if you act now.
Beat Rising Rates and Prices
While some speculators hoped prices would fall this year, that certainly doesn’t seem to be the case in Toronto, as the Toronto Real Estate Board reports the GTA’s average home price vaulted to $730,472 last month, up 20% from December 2015.
While fixed mortgage rates saw a spike of almost 0.60% since October 2016, there is some favourable early-year competition. There are a few balance sheet-based lenders who came out swinging after the bell rang in the beginning 2017 to capture some early home shoppers. However, the banks are expected to add more fees in the upcoming months.
High-ratio purchasers – those who have less than 20% down payment – will benefit most from lender competitiveness. However, there could be premiums priced in soon for mortgage holders with larger down payments, those refinancing their current term, purchasers of rental properties, and purchasers of homes over $1 million, due to new lender mortgage funding rules that took effect last year.
Take Advantage of Less Competition
It is very beneficial to get your mortgage pre-approval when the housing market is quieter, especially as there have been many recent industry changes that may have affected what you can afford.
It’s also smart to get your mortgage application in order; by going through the motions now you will already have your letter of employment, your bank account statements to your mortgage professional, and know your credit score before the housing rush comes to fruition and everyone is vying for the same attention. You’ll also have time to give the attention to unforeseen things such as paying out a phone bill that went to collections, or your HR personnel who writes the company employment letters is on holiday all in time before the rush of the spring housing market.
Prepare for the Real Estate Reality
Keep in mind that mortgage pre-approvals typically have a marginally higher rate than if you were in a live deal, and are usually a bit more conservative of what you can afford. A pre-approval will buy you up to 120 days of knowing what you can purchase a home for before the rate expires – that means you can shop for homes with confidence. In the worst-case scenario that you don’t find a home within your pre-approval time period, then you simply have to show minimal information to your mortgage professional to gain another 120 days of assurance.