Monthly Archives: February 2022

When we purchase a home, there is always a lot of paperwork involved. But let’s face it, most of us don’t enjoy that part. However, all the documents we fill out are immensely important. For example, one of the most important forms you’ll need is the pre-approval letter when applying for a mortgage. It tells the mortgage company about your financial situation and makes for a smoother process.

What Is a Pre-Approval Letter?

Basically, a pre-approval letter is a letter lenders give to the potential homebuyer in advance. It’s a pre-approval of the final mortgage amount that the lender can give. This letter highlights how much money a potential homebuyer can get based on their income and assets, among other things. It helps homebuyers figure out how much they can spend on a home once they buy it.

How the Amount is Determined for a Pre-Approval Letter

The amount of a pre-approval letter is based on the borrower’s income, assets, and other factors. Things like your credit score, ability to pay the mortgage, or your occupation will all be taken into consideration. 

Pre-approval amounts can vary depending on the lender and the type of loan. Typically, a pre-approval letter will be in the ballpark of the amount of the mortgage loan that you’ll be getting.

Why Is It Important to Have a Pre-approval Letter?

Pre-approval letters make it easier to complete the financial aspects of purchasing a home. The letter establishes the borrower’s creditworthiness and shows the lender that they’re a good candidate for the loan. It also helps you figure out how much you can spend on a home.

When a buyer has a lot of stress weighing on them, pre-approval letters can help by giving them a clear idea of what their financial situation is.

How to Get Pre-Approved for a Mortgage

Here are some steps to get pre-approved for a mortgage:

• Contact a few lenders to see who will give you the best rates and options for your mortgage.
• Get pre-qualified for a mortgage.
• Once you get pre-approved, the lender will let you know what your maximum mortgage amount will be.
• Discuss the mortgage options with your real estate agent.
• Pick a home and make an offer. (The lender will ask for a copy of your pre-approval letter).

If you’re pre-approved for a mortgage, there are some things you need to know. Once you’re pre-approved for a mortgage, you still have to apply for the mortgage. You’re only pre-approved because this pre-approval is subject to a number of factors. Your offer price, the appraised value of your home, or any other conditions may affect your approval.

Also, make sure that you don’t sign anything where you agree to borrow more than you’re pre-approved for. You can’t sell your home for more than the assessed value.

Get Pre-Approved Today

Getting pre-approved for a mortgage is a great way to ensure that you can afford the home you want to buy. The pre-approval letter shows the mortgage lender that you’re a good candidate for the loan and helps you determine how much you can spend on a home. Pre-approval letters can be really helpful when you’re buying a home! 

Let us help you with your mortgage pre-approval letter in Ottawa. Here at Ottawa Mortgage Services, we provide our services to first-time homebuyers, self-employed individuals, and commercial clients. Get in touch with us!

If you have a mortgage, you are pretty concerned about interest rates! Mortgages grow more costly when interest rates rise. It becomes considerably simpler to keep up with a mortgage when interest rates fall. The issue is that you’re not only buying a mortgage based on today’s rate; your mortgage will be susceptible to changing interest rates over time, often spanning decades.

As a result, it’s critical to understand if mortgage rates in Canada are rising or falling. This is a complicated issue to address; however, we can discuss a few points that may be helpful. In this post, we’ll discuss mortgage rates, but many of the same laws apply to other forms of interest rates, so we’ll use the words interchangeably.

How to Tell Whether Interest Rates Are Rising or Falling

It’s impossible to predict whether interest rates will climb or fall, but there are techniques to make educated predictions. Understanding the status of the national economy, the global economy, and your present social and political situations can help you predict whether mortgage rates will climb or decline.

We understand that seems complicated, so don’t worry. We’ve discussed some of the primary variables that influence interest rates, as well as what to look for in each one, below. Consider each of the indicators listed below to determine if mortgage rates are growing or lowering.

How banks set mortgage rates (the cost of lending)

One of the main things you’ll hear about today is the cost of lending. This isn’t an abstract concept, but it’s not something that’s easy to understand either.

The cost of lending is the amount of money a bank has to make to keep itself afloat. It’s a massive part of what makes lending possible, and it’s no mystery why banks want to make lots of money in this regard.

Economic conditions 

In theory, the national economy dictates how many people have jobs, how much money they make, and how much money people can spend on homes. If the economy is good, more people have jobs, so people can afford to buy more homes.

Similarly, the economy sets the tone for how many people are looking to put their money in banks to earn interest. The more people that want to make the most of their money, the more competition they make for banks to get their money.

Because the national economy can give a sense of how much money is going around, we may predict how many people will want to invest. The more people are interested in investing, the more competition there is for banks to loan money, and the more that bank rate will rise.

The Impact of Rare Events

Rare events are unlikely to happen and will significantly impact the economy if they happen. Because of this, we can’t accurately predict whether a rare event will happen.

This is why interest rates are so tricky. If a major disaster hits, interest rates could fall through the floor for years. Interest rates can take off if the stock market crashes and the economy is thrown into a free fall.

Competition Between Banks

Banks don’t want to be the only bank lending money for their interest rates to be one percent per year less than their competitors. They have to have a competitive interest rate to make money.

Furthermore, banks want to be competitive with foreign banks. If the Canadian dollar is weak, it’s harder for Canadian banks to compete with foreign banks.

Conclusion

It’s virtually impossible to know whether interest rates will rise or fall based on the current landscape. It’s possible to get a sense of how interest rates might climb or fall in the future; however, you should always consider the impact of rare events.

Ottawa Mortgage Services provides mortgage agent services for first-time homebuyers, self-employed individuals, commercial clients, and more. We also help clients with refinancing, pre-approvals, and debt consolidation. If you’re a first-time home buyer in Ottawa, we can help you find the right mortgage in the right neighbourhood. Get in touch with us today and let us know how we can help!

Finally making up your mind to get a home can be quite a loaded decision, especially since the home buying process can be rather complex. For a number of people exploring the housing market for the first time, it can be a completely foreign experience with a vocabulary that you may not totally grasp. 

One aspect of home buying that you should learn a little bit more about is the mortgage loans that you’re going to borrow. Taking out this lump sum of money will help you acquire a home that you can call your own.

There are a variety of terminologies within this borrowing stage that you need to know about, such as the mortgage pre-qualification, pre-approval, and more. Continue reading to learn more about what these terms mean to be more informed about the process.

Mortgage Pre-Qualification

Mortgage pre-qualification is the first thing you would have to obtain in the home-buying process. This is commonly confused with mortgage pre-approvals, but a pre-qualification is a quicker process that doesn’t take into account your credit rating.

Instead, consider it as a quick simulation of discussing the mortgage loan you’re going to take out. A mortgage agent can help you discuss and gain a better understanding of the current mortgage rates and options that you will face in the future. 

Mortgage Pre-Approval

A mortgage pre-approval is usually one of the lengthier periods of borrowing a loan, as it involves a more in-depth look at your financial situation and capabilities. Expect to have specific documentation required as proof of your identity, income and assets. It can take a couple of days as there is a verification process.

Once you are granted mortgage pre-approval in the future, it will usually remain as is for about  60 to 120 days. Be sure to clarify the terms with them to know how long you have to find a home. Extensions can be negotiated, but documentation may require a resubmission, though it will be subject to your financial situation’s stability.

Mortgage Rate Guarantee

A mortgage rate guarantee is what buyers may get during pre-approval, though they aren’t given by every service. Most homeowners may like this more, though, as there’s a period of protection from increased rates when the market shifts.

The protection’s length of time can depend on a mortgage agent’s disclosure and negotiation with you. This should typically be accompanied by a conditional commitment during the mortgage pre-approval so that you get a sense of the expected total loan amount.

Mortgage Rate Holds

A mortgage rate hold is similar to a rate guarantee that it locks in the mortgage rates, but this is specific to fixed mortgage loans, unlike variable ones that may fluctuate and depend on the market more. This can be beneficial if you seek to get constantly lower mortgage rates.

Keep in mind that acquiring a mortgage rate hold can be slightly different depending on who you’re dealing with. Some may aim to lock in a variety of different mortgage rates, while others will monitor the market to maximize your rate hold. Work with a reliable mortgage agent. 

Conclusion

By reading this guide, you should have a better understanding of what different aspects of the mortgage borrowing process will entail. Be sure to stay on your toes and keep up with the speed of the market so that you can get your dream home soon. 

Looking for mortgage services in Ottawa? Ottawa Mortgage Services offers mortgage agent services for first-time homebuyers, self-employed individuals and commercial clients. Get in touch with us now!