Finding out what amount you can qualify for based on your current financial situation. Getting pre-approved is the initial step as it will help you determine what is total mortgage amount that you can qualify but also it will help identify if there are elements of your mortgage application that needs to be addressed. May be your credit needs to be improved or may be you don’t have enough down payment and you need to save more money.

It is similar to the mortgage application process except that the borrower hasn’t set his eyes on a specific property just yet. The borrower has to fill a mortgage application and provide the supporting documents for the mortgage broker to assess his situation. Once reviewed the mortgage broker will submit the file to a lender for approbation. There are two benefits to a mortgage pre-approval, first knowing the total amount that a homeowner can qualify for and second, it will secure you interest rate for 120 days. If rates go up during that period you will not be affected but if they go down you will be able to get the lower rate.

It is the mortgage rate used to qualify the borrower for his mortgage application. The rate is the highest of 5.25% or the mortgage rate selected by the borrower plus 2% and the borrower’s application needs to respect the debt ratios. The stress test is to make sure that the borrower can sustain future rates increase. Important, that the stress is only application when applying for a mortgage, at time of renewal if you change lender, you will not have to pass the stress again unless you increase your mortgage amount.

The minimum downpayment a first-time home buyer needs to bring is a scale, 5% for the 1 st $500,000 of the property value and 10% of the value above $500,000. If you aren’t a first-time home buyer, the minimum will be 20%. In addition to the downpayment, the homebuyer also needs to save for the closing costs that can represents between 1% and 3% of the purchase price of the property.

Often, first-time homebuyer underestimates the process and all the costs involved in becoming a homeowner. Borrower often inflates their income and minimizes their liabilities. The ultimate truth comes with the supporting documents. For the qualification process we have to use official income documents.