Designing a Mortgage That's Right For You!
With interest rates rising, it's important to lock in a lower rate as soon as possible. You can do this with the right home mortgage pre-approval. Find out how!
Do you plan on searching for and buying a home in the coming months? With rising interest rates, you may decide to move forward with your plans before rates go any higher. Many experts recommend meeting with your mortgage broker or financial institution to obtain a mortgage pre-approval.
There are many benefits to getting a pre-approval letter, including how it can affect your interest rate. Additionally, a pre-approval shows sellers that you are a qualified, motivated buyer. Every advantage you can gain in a seller's market will improve your chance of closing on your dream home.
With the mortgage pre-approval in hand, you'll see how much a lender is willing to give you toward a home purchase. This can help you set expectations and a budget while searching for a home. It's also a good idea to obtain a pre-approval prior to making an offer.
The pre-approval provides you with the following:
Although it varies from lender to lender, once you obtain a pre-approval, the interest rate is usually locked in for 90 to 120 days. This is a great advantage if interest rates are climbing. On the other hand, if interest rates start to decline, you can negotiate a better rate just before the close.
Note that interest rate locks do not necessarily apply to variable-rate mortgages. That's because they are determined by national rates and indices that can change.
It's still worthwhile to obtain a pre-approval even if you have a variable rate mortgage. That's because variable-rate mortgages are based on the lender's prime rate. When you lock in that rate, you can protect yourself from changes that occur during the pre-approval period. Your pre-approval locks in today's discount rate no matter what happens to the prime during the pre-approval.
Ask your lender if they offer fixed payments on variable-rate mortgages. This option allows you to lock in a consistent monthly payment. However, keep in mind that if interest rates increase, the amount of principal you pay each month will decrease as more of the payment will go toward the interest.
There are many benefits to obtaining a mortgage pre-approval, including the following:
In many cases, a pre-approval is a big step. After the lender checks your credit and goes through your documents, they may guarantee the amount and interest rate on the pre-approval. Ask your lender or mortgage broker to walk you through the specifics of the pre-approval and how solid the offer really is.
Getting your pre-approval will not hurt your credit. Instead, it will help you get your finances in order so that you can obtain a mortgage. So, if you're ready to begin your home search, a mortgage pre-approval can answer many questions regarding how you will pay for it.
For more information contact us, the Mortgage Designers, Your Victoria BC Mortgage Brokers of Choice today!