Looking at various homes for sale in Abbotsford? There is a way you can expedite your purchase process and get the best finance deals for your purchase. Learn more about pre-approval in the following lines and get the best deal on your mortgage.
Purpose of a pre-approval letter: A pre-approval letter is a commitment from a bank that you are qualified to get certain amount of money from the bank and that you can be trusted as a buyer. Primarily, two things are covered in the pre approval letter. These include:
- Your buying capacity and the amount you can get on a mortgage.
- It signifies you as a serious buyer in the eyes of the seller.
With a pre-approval letter in your name it becomes evident to the sellers that you have met the required criteria to secure a loan for purchasing a home. However, things which are not denoted by this letter include:
- Property you are willing to buy
- Interest rate on your mortgage
- Guarantee to receive loan amount
Requirements to get pre-approved: To secure a pre-approval letter you are required to contact a lender. It is not necessary to finalise the lender from the ones you are consulting. Every lending institution has a similar criteria and formulas to evaluate you. You can consult multiple lenders to compare the offers beings made. Try not to exceed three lenders as it can have an effect on your credit rating.
Some documents that you might be asked to present include:
- Earning statement from a regular job
- Tax returns (typically 2 years)
- Latest bank statements
- Business tax returns in case of business owners
Apart from your documents they lenders will also do a check on your credit history and check the credit score. While a good credit score will help expedite things in a great way, a negative or bad credit score can create hindrances in the pre-approval process.
Popular Mortgage Types: There are two main types of mortgages in financial institutions namely- Fixed Rate Mortgages and Adjustable Rate Mortgages. The basic difference between the two is that in a fixed rate mortgage the interest rate doesn’t change through the loan tenure while it can vary under a adjustable rate mortgage.
Both mortgage types have their own set of consequences, while a fixed rate is often higher but makes sense if you’ll be staying in same place for long while adjustable rate mortgage is a riskier one as it will change will ongoing interest rates- whether lower or higher.
Fixed Rate Mortgage: In the present day scenario it is recommended to go for a fixed rate mortgage as it is good for loan terms of 15-30 years. Some benefits of going for this mortgage type are:
- Fixed payments
- Increase in rates will be beneficial for you
- Refinancing is an option if rates fall
- You rate of interest remains constant
Adjustable Rate Mortgages (ARMs)
This mortgage fixes your interest rate for a certain amount of time and then is set to fluctuate with ongoing market rates. The overall interest rates are usually lower than that of fixed rate mortgages, but they are a subject to changing market policies.
ARMs are beneficial if you are not expecting to stay for long at one place. Some other benefits of the same are:
- Lower initial interest rates than the counterpart
- Initial payments are lower
- You might be able to qualify for a bigger loan amount.
Visit http://abbotsfordhomeforsale.ca/ to check out the latest listings in Abbotsford and nearby areas and start planning for a finance accordingly.