After eight successive rate hikes, the Bank of Canada held its benchmark policy rate steady to 4.5% in March 2023. As a result, some Canadians may be ready to reassess their home buying plans, which may require some mortgage shopping.
Pre-qualification and pre-approval are common terms you’ll hear in the mortgage space. While both options can be a helpful first step toward securing a mortgage loan, there are some distinctions between mortgage pre-qualification and mortgage pre-approval that are critical for borrowers to note.
Pre-qualification can be a preemptive step in the home buying process, and is meant to help borrowers get a feel for the loan amount they might be able to secure. It’s typically a brief process that involves going over the borrower’s financial situation.
“Pre-qualification is a very casual calculation. It’s usually verbal,” says Harpreet Singh, a REALTOR® with Avion Realty Inc. in Markham, Ontario, and former Financial Services Representative with CIBC. “There’s no application in the system, and even if I’m checking your documentation, no third party is checking it.”
Although the lender may perform what’s called a “soft credit inquiry,” Singh says pre-qualification “has no implication” on the borrower’s credit score.
Since it’s simply a rough estimate, pre-qualification doesn’t guarantee the borrower will be approved for the loan amount quoted down the line.
Pre-approval is a much more formal and lengthy process. It requires a comprehensive review of income, debts, and assets. Unlike pre-qualification, it calls for a “hard credit inquiry,” so it can temporarily lower your credit score.
“It’s pretty much a full-fledged mortgage application,” says Singh. “You’re taking in all your documentation—your pay stubs, your savings account statements—into your bank and the bank will pre-approve you for a loan amount. The approval is usually good for three or four months.”
While pre-approval doesn’t necessarily guarantee a loan, it’s a more serious step in the mortgage process, and can help homeowners to close on a home faster once they’re ready to buy. Additionally, the pre-approval process can help borrowers to identify and resolve any issues with their credit.
“Let’s say you have a car loan and you have $5,000 owing on it, or you had a credit card from a long time ago that you never made the payment on. Even if it’s a very small payment, it could impact your mortgage application,” says Singh. “With pre-approval, you can rectify all those mistakes beforehand.”
In a REALTOR.ca Living Room blog article debunking common real estate myths, REALTOR® Kevin Appl, in Saskatoon, Saskatchewan, told us one of the biggest misconceptions around real estate is that it’s OK to home shop without pre-approval.
“Why would you house shop without knowing your budget?” he said. “I’ve seen this several times when a client starts to budget creep and winds up falling in love with a property that a lender ultimately can’t finance for them. It’s heartbreaking. Plus, from the perspective of a REALTOR®, we’re unable to fully serve the client since we have no idea of a shopping range, as well as how competitive that buyer will be in a multiple offer situation without financing.”
Generally speaking, Singh recommends his clients go the pre-approval route if they’re serious about their home buying plans. Getting pre-approved can give buyers a competitive advantage in a competitive housing market, and allow borrowers to lock in a more desirable loan amount in an uncertain rate environment.
That said, there are circumstances in which pre-qualification is the better option. For instance, if the borrower is simply sizing up their options, and isn’t planning to purchase for a number of months, or if they have concerns about their credit score.
“I’ll also move clients towards a pre-qualification phase if I think the application itself is very simple,” adds Singh.
In any case, whether you opt for pre-qualification or pre-approval, Singh recommends prospective home buyers work with an expert to assess which option—pre-qualification or pre-approval—is right for them. Beyond that, he cautions borrowers against holding information back when dealing with a mortgage agent.
“Buying a home is the biggest transaction of someone’s life, so it’s important to give as much information as you can to your mortgage agent,” he says. “In the end, your mortgage application is a story. The better you explain your story, the better off you’ll be.”
The article above is for information purposes and is not legal or financial advice or a substitute for legal counsel.
What are some common signs around the home that can lead to more serious problems for you in the future? And how does this affect your quality of life at home, not to mention the resale value?
When you own a home, you get to pick and choose when you want to make aesthetic repairs. Chipped paint in the wall may not be at the top of your priority list, but sometimes things we think can be left alone are actually a sign of larger issues at play. Ignoring these common problems around your home can lead to troubling outcomes, so it’s important to address them before they potentially become more serious—and more costly.
What starts out as a small water stain or a warped wall or ceiling is often a sign of a leaky roof, dripping pipes, or faulty plumbing. Whether big or small, every leak should be looked into as soon as possible.
“The first thing to check for are fixtures (faucets, sinks, toilets) then check your bathroom showers or tubs by running water through them,” says Paul Rodriguez of Intelligent Contracting Solutions, Ltd. in Toronto, Ontario. “Water intrusion into the home is a problem that cannot be ignored. It can lead to issues that will be expensive to remediate. If you’re unsure, call a plumber right away!”
Water spots, warped or missing shingles, or water-damaged exterior walls are all signs of roof leaks. If you suspect a leak on your roof, you can check in your attic for water damage or mould around the rafters and roof sheathing. Leaks can also be identified by going onto the roof itself, but in this scenario you should call in a roofing professional to do so.
Without being inspected and repaired, leaks can lead to water damage to your drywall, insulation, and flooring. As a result, mould, and mildew springs up. Ensure you quickly identify where the leak is coming from and call in a plumber or roofing professional (depending on where the leak originated) to get it repaired. The longer the leak lasts, the more likely structural damage and mould can occur, negatively affecting the health and resale value of your home.
Any time water or excess moisture enters your home, toxic mould can grow. Signs to look out for include musty, stale-smelling air, and small black specks, especially in your basement, attic, or around damp areas in your house, such as your laundry room. You may also feel your own health being affected with sinus, cold, and other symptoms. Don’t forget to check for mould and mildew if you’ve recently had to repair a water stain as mentioned above.
“Don’t ignore leaks, they can lead to mould,” Rodriguez cautions. “This can have serious health impacts. If you notice mould behind drywall, inside cabinets, or another place where a leak has been happening, call an abatement company after having dealt with the leak with a plumber.”
It’s important to address mould growth before it spreads.You’ll need to identify why they’re occurring, and what repairs need to be done to prevent it. According to Health Canada, household dampness and mould can lead to eye, nose, and throat irritation, worsening of asthma symptoms, bronchitis, and eczema—all depending on the species, severity, and length of exposure.
Potential buyers would absolutely take this into consideration, learn of the cost of repairs needed to stop the issue, and then take this into account when submitting bids.
In Canada, our homes become subjected to extreme changes in weather, such as heavy wind,storms and relentless freeze-thaw cycles. Because of this, small hairline fractures may occur in the concrete around the outside of your house. These small cracks are common, but it’s important to look out for bulging or buckling in the concrete, or cracks wider than about the width of a pencil. These can be signs of more significant problems which require repairs to your foundation—no small task If you do see some cracks, but you’re not sure whether it’s time to call in a structural engineer or foundation contractor, Rodriguez says you can monitor them on your own—at first.
“Take a marker and make two lines across from each other, on opposite sides of the crack. Measure between the two lines, record the measurements. Come back in three weeks and measure again. If the gap has increased, call a structural engineer for an assessment. Settlement in new construction can happen, but drastic changes can mean something is wrong with the foundation such as footings or drainage.”
If the gap hasn’t widened, there’s no need to address them unless you want to for aesthetic reasons. Just keep an eye on them and make sure they don’t grow. Without being addressed, these larger cracks can grow, allowing water and salt to enter the concrete and further erode the steel rebar within the foundation of your home. When this rebar erodes, it threatens the durability of your home and can lead to potential rotting and damage to the internal structure of your home.
Other signs to look out for that signify your home’s foundation is shifting include cracks in the paint inside your home, difficulty opening and closing your doors and windows, or uneven flooring. Though these issues may be harmless—door frames can shift due to humidity in the summer—they may also be signs that one of the joists that support your flooring has rotted or is broken, requiring a replacement. If you’re unsure, it’s always best to get professional advice.
Foundation issues can significantly affect the resale value of your home as a new owner would have to pay for repairs. Cracks in a foundation are something home inspectors look for, and if a home inspection is included as a condition of your home’s sale, it could mean the deal won’t go through.
Pests and rodents can cause significant damage to your home, termites being one of the most destructive. Aside from the very unpleasant idea of having critters running around your home, rodents can cause damage you may not see right away.
“It’s important to have your home protected from the intrusion of rodents,” Rodriguez explains. “They can destroy insulation, wiring, and other components behind walls or in your attic. Inspect your home yearly for gaps around soffit and fascia, shingles or missing roofing materials. There are companies who specialize in removing rodents, squirrels or raccoons, as well as making sure they stay out.”
When it comes to insects, they can cause structural damage to your drywall and baseboards.
“Pests can be worse [than rodents] and detrimental to your wellbeing,” Rodriguez tells us. “ Identify what these pests may be in your area and call a specialist to treat and prevent intrusion.”
Signs to look out for include “termite tunnels,” which are small black or brown stick-looking tunnels made from wood, soil, and termite saliva. Small piles of shed wings, a significant amount of dead insects, mouse waste, chewed wires, or ripped-up paper, cardboard, or fabric are also indicators that you have a pest problem.
It’s important to get an exterminator in your home and identify how these pests are getting in to prevent future problems. The longer you leave these insects and rodents alone, the more time they will have to breed and cause even more damage, lowering the resale value of your property.
Do you own an older home that hasn’t had its electrical wiring inspected? There may be some tell-tale signs your home is experiencing electrical overload.
“Flickering lights or a breaker always tripping when running multiple appliances can be signs of shoddy electrical work or overloaded circuits,” Rodriguez says. “Ignoring these signs can lead to appliance damage, or worse, an electrical fire. Don’t wait, call a licensed electrical contractor to assess and repair any damage or improper wiring. Make sure an ESA [Electrical Safety Authority] permit is pulled and work is inspected. This way you can ensure that the work is done by code.”
Rewiring an entire home can be costly but is necessary and should be done as soon as possible by a licensed professional. When potential buyers have your home inspected, these wiring issues will definitely affect your house’s resale value.
If you ignore little problems, they become big. Don’t write off these signs of potential problems that can cost you more in the future.
4 Ways to Find the Time to Sell your Home
Are you thinking about selling your home this spring? If so, one factor that may be holding you back is time. You might be worried that you won’t find the time in your busy schedule to sell your property successfully.
If so, here are four strategies that will help:
1. Understand what needs to be done
Do you know what you’ll need to do to sell your home? Do you understand the steps involved? Do you have a clear idea of how long it will take to complete various tasks, like getting repairs done and doing some “staging”?
The more accurately you can anticipate your tasks and how long it will take to complete them, the better you’ll be able to plan and schedule.
2. Keep a “moving” calendar
It’s a known time management fact that using a calendar and blocking out time for tasks will ultimately save you time. So, use your calendar, or create a new one just for moving-related items. With an up-to-date calendar in place, you’ll always have a view of what needs to be done and how those tasks fit into your weekly schedule.
Maintaining a moving calendar also reduces stress.
3. Ask for advice
How should you stage your main floor? Should you make any home improvements? How should you prepare for a buyer coming to view your property?
You don’t need to guess or Google. Get professional advice. Doing so will expose you to the most current best practices and will save you time.
4. Hire help
You don’t need to do everything on your own. Instead, consider hiring professionals to do at least some of the work for you. For example, hire a painter, a lawn mowing service or a dog walker.
Hiring professionals during the selling period can save you countless hours. And, those costs may be offset by the sale of your home.