Two key things to understand about mortgage applications:
- An application does not mean you’re actually applying for a mortgage. Mortgages are complicated and have numerous stages. What an application does is gather key information and starts a conversation that turns broker expertise into positive change. Compare it to applying for a job. Filling out a job application is a way of showing interest and starting the process. You don’t just get the job. Banks, lenders, and mortgage brokers use applications to collect basic information that helps them asks questions and set goals. This connects us to #2.
- Applications help you get a sense of what you can afford and what steps you need to take to afford more at a lower interest rate.
Why complete an application if you’re only thinking about buying?
Because it makes that future purchase cheaper, easier, and faster.
An application helps your broker or lender set you up for success and makes the purchase smoother. Completing an application a year before you’re ready to buy (for example) gives you a year of advice and best practices that sets you up for success and helps you buy the property you want under ideal lending circumstances.
What a mortgage application improves or makes clear:
- Credit – Credit is critical to securing a low interest rate on your purchase. A mortgage application shines a light on your credit situation and a good broker can then give you to-do’s and don’t-do’s that improve a score or maintain a great score. A great score gives access to the best mortgage products but improving it can take time. A pre-emptive mortgage application gives you that time. With the proper guidance many people benefit from credit remediation or with some fundamental changes to their credit management habits.
- Closing Costs – The costs associated with buying a property are high and you don’t want to be short of cash when you find your dream home. Legal costs, land transfer taxes and other associated costs run in the thousands of dollars. When you send us your mortgage application we come back with a complete mortgage summary that covers all of your bases – including closing costs.
- Budget – An application lays out the numbers of your buying power and a good mortgage broker should circle things you could do to improve it. Maybe that’s adding a few thousand more in your down payment or contributing to an RRSP. Perhaps a second property is coming up for renewal and could be a source of cash. Government regulations, like the stress test, need to be considered. Getting a head start here has many, many advantages.
- Details and Decisions: – Is the mortgage insured? Is the mortgage conventional? What applies in your case
Even a ‘normal’ home purchase is complicated. Home searches can take months, even years. The better prepared you are, the more comfortable and flexible you’ll be in crunch time. There is nothing more reassuring than the confidence that comes with preparation.
Why you should send us your application
We turn your application into comprehensive feedback that we call the Mortgage Summary. It is a living document that captures your Credit, Budget, Closing Costs, Timing, Down Payment and Interest Rate (including rate holds for pre-approvals). When your situation changes, it changes.