If you're a Canadian home buyer, you might be wondering: Will mortgage rates finally drop? The answer is looking hopeful! The Bank of Canada is projected to cut interest rates by 100 basis points in 2024, with another 100-point cut expected in 2025. This shift is driven by economic slowdowns and lower inflation, which means borrowing could soon become more affordable. Whether you’re a first-time homebuyer or already have a mortgage, these rate cuts could offer significant savings.
What Economists Are Saying
According to TD Economist James Orlando, "We expect the Bank of Canada isn’t done. We foresee two more cuts in 2024, with a continued downward trend into 2025." So, with rates potentially continuing to decline, now might be the perfect time to get serious about your home-buying plans.
Why Getting Pre-Approved Now is Smart
With the possibility of more housing market activity on the horizon, securing a mortgage pre-approval is a smart move. Not only does it give you a clear idea of your budget, but it also shows sellers you're a serious buyer, which can give you a competitive edge.
But what exactly does it mean to get pre-approved, and how do you do it? Let’s walk through the steps.
5 Pre-Approval Tips for Home Buyers
1. Check Your Credit Score Before you even start the pre-approval process, take a good look at your credit score. A higher score can unlock better mortgage rates, so if your score could use a boost, spend a few months improving it before applying.
2. Gather Your Financial Documents Lenders will want to see proof of your financial situation. Make sure you have these documents ready:
Proof of income (pay stubs, tax returns)
A list of your assets and debts
Proof of employment
Recent bank statements
Being prepared will make the pre-approval process much smoother.
3. Shop Around for Lenders Don’t just go with the first lender you find. Different lenders may offer varying rates and terms, so it’s worth shopping around to make sure you’re getting the best deal. A small difference in interest rates can make a big impact on your mortgage in the long run.
4. Know Your Budget It’s essential to have a clear idea of how much you can afford. Use a mortgage calculator to estimate your monthly payments, factoring in potential down payments, closing costs, and property taxes. Knowing your limits helps you avoid falling in love with a home that’s out of reach.
5. Keep Your Finances Stable After getting pre-approved, it’s crucial to keep your financial situation steady. Avoid making large purchases or taking on new debt, as this could affect your final mortgage approval.
Steps to Get Pre-Approved for a Mortgage
Step 1: Complete a Mortgage ApplicationThis is the first step, and it can often be done online. Your application will include information about your income, employment, assets, and debts. This gives the lender a snapshot of your financial health.
Step 2: Submit Required DocumentsLenders will request specific documents, like proof of income, credit history, and identification. Having these ready will speed up the process.
Step 3: Receive Your Pre-Approval LetterOnce approved, you’ll receive a pre-approval letter outlining the loan amount you're eligible for. This letter is essential when house hunting because it shows sellers you’re financially prepared.
Step 4: Lock in Your RateMany lenders allow you to lock in your pre-approval rate for a certain period—usually 60 to 120 days. This protects you from any potential rate increases while you’re shopping for a home.
The Bottom Line
With mortgage rates expected to drop, now could be the perfect time to secure a pre-approval and start planning your home purchase. The Vancouver real estate market is highly competitive, and having a pre-approval can make all the difference when the right property comes along.
Are you thinking about buying a home in Vancouver? Let’s get you ready for the next steps! Whether you're a first-time buyer or looking to move up in the market, pre-approval is key to securing your dream home. Ready to start? Reach out, and I’ll guide you through the process!
Erin Price Emery
Contact me: erin@priceemery.com
Call or text: 604-767-7725
Explore homes for sale in Vancouver and other areas listitvancouver.com
Sherlock Yam
Contact me: sherlock.yam@cleartrust.ca
Call or text: 604-618-5202