Serious About Moving? Here’s Why Pre-Approval Should Be Your First Move

If you’re serious about buying a home, getting pre-approved for a mortgage is not just a helpful step—it’s an essential one. Pre-approval sets the foundation for your home-buying process by giving you a clear understanding of your budget, streamlining the offer process, and showing sellers you’re ready to act. But it’s about more than just your income—lenders take a comprehensive look at your financial picture, which can make or break your approval. Let’s explore why pre-approval should be your first move as a serious buyer, the potential complexities involved, and how to navigate them.

What Is Pre-Approval, and Why Is It Essential?

Pre-approval is a lender’s initial review of your financial situation to determine how much mortgage you qualify for. This isn’t just an estimate—it’s a formal process that looks at your income, debts, credit history, and down payment. With pre-approval, you’ll know exactly how much you can spend, giving you the confidence to search for homes within your price range.

For serious buyers, pre-approval offers several key benefits:

• Clear Budgeting: Know what you can afford before you start house hunting.

• Strengthened Offers: Sellers see pre-approved buyers as serious and reliable.

• Time Savings: Eliminate guesswork and focus on homes you’re qualified to buy.

Why Income Alone Isn’t Enough

While your income is a critical piece of the puzzle, it’s far from the only factor lenders consider. Here are some of the other elements that can significantly impact your pre-approval:

1. Credit History and Score

   • A strong credit score (typically 660 or higher) shows lenders that you’re a reliable borrower.

   • Late payments, high credit utilization, or past bankruptcies can lower your approval odds, even with a high income.

2. Debt-to-Income Ratio

   • Lenders assess how much of your monthly income goes toward paying debts like car loans, student loans, or credit cards.

   • Your Gross Debt Service (GDS) ratio should stay under 39%, and your Total Debt Service (TDS) ratio under 44%.

3. Mortgage Stress Test

   • In Canada, lenders apply a stress test to ensure you can handle higher interest rates. They calculate affordability using either the benchmark rate (5.25%) or your contract rate +2%, whichever is higher.

4. Down Payment

   • The size of your down payment affects both your mortgage approval and monthly payments. Down payments start as low as 5% for an insured mortgage and 20%+ for an uninsured mortgage. In expensive markets like Vancouver, 5% is the only way to get into a market.

5. Additional Costs

   • Property taxes, closing costs, and maintenance expenses are all part of homeownership and factor into your overall affordability.

What If I Currently Own a Home?

If you already own a home, the pre-approval process can still be complex. Owning property might give you equity to leverage, but it can also come with complexities:

1. Mortgage Payout Penalties

   • If you’re breaking your current mortgage early, you may face penalties. These can vary depending on your lender and the terms of your mortgage.

   • Some lenders offer portable mortgages, allowing you to transfer your existing mortgage to a new home without penalties.

2. Bridging the Gap

   • If you’re buying before selling your current home, you may need bridge financing to cover the gap between closing dates.

3. Calculating Your Equity

   • Your home’s current market value minus any outstanding mortgage balance represents your equity, which can be used as part of your down payment for the new property.

4. Not Always a Slam Dunk

   • Even with home equity and a solid income, other factors like debt levels or credit issues can still complicate approval.

Consult the Experts

Navigating these complexities is where professional advice is invaluable.

• Speak with Your Mortgage Professional: A mortgage broker or lender can help assess potential penalties, financing options, and whether porting your mortgage makes sense.

• Lean on Your Realtor: A good real estate agent will have strong mortgage contacts to connect you with professionals who understand your unique situation.

How Pre-Approval Prepares You to Make an Offer

Being pre-approved gives you the tools you need to act quickly and confidently when you find the right home. Here’s how it helps:

1. A Competitive Edge

   • In a competitive market, a pre-approval letter shows sellers you’re financially ready to buy, making your offer more appealing.

2. Streamlined Decision-Making

   • With a clear budget, you can narrow your search to homes you can afford, saving time and avoiding disappointment.

3. Fewer Delays

   • When you’re pre-approved, much of the financial review process is already complete, allowing you to close faster once your offer is accepted.

And How Do I Do It?

Getting pre-approved is easier than you might think. Here are the steps:

1. Choose a Lender or Mortgage Broker

   • Research different lenders and brokers to find one that offers competitive rates and personalized service. A broker can compare multiple lenders for you.

2. Gather Your Documents

   • Most lenders will require:

     • Proof of income (pay stubs, T4s, or tax returns for the self-employed).

     • Bank statements to verify your savings and down payment.

     • Details of existing debts like car loans or credit cards.

     • Government-issued ID.

3. Check Your Credit Score

   • Lenders will pull your credit report as part of the process, but it’s a good idea to check it yourself beforehand to catch any errors or red flags.

4. Submit an Application

   • Fill out the pre-approval application with your chosen lender. They’ll review your financial situation and provide a pre-approval letter indicating how much you qualify for.

5. Understand the Terms

   • Your pre-approval will specify the maximum amount you can borrow, your estimated monthly payments, and the interest rate (often locked in for 90–120 days).

6. Stick to Your Budget

   • Just because you’re approved for a certain amount doesn’t mean you should max it out. Consider leaving room for property taxes, home maintenance, and other costs.

Ready to Get Started?

Getting pre-approved isn’t just about meeting lender requirements—it’s about setting yourself up for success. From understanding your budget to preparing for additional costs, pre-approval ensures you’re fully equipped to make a strong offer and secure your dream home.

If you’re serious about buying, don’t wait to take this critical first step. I can connect you with trusted mortgage professionals and guide you through the entire process. Ready to get pre-approved and move forward with confidence? Let’s talk today!

After months of tracking approximately twenty per cent below the ten-year seasonal average, Metro Vancouver home sales surged more than 30 per cent year-over-year in October.

The Greater Vancouver REALTORS® (GVR) reports that residential sales registered on the Multiple Listing Service® (MLS®) in the region totalled 2,632 in October 2024, a 31.9 per cent increase from the 1,996 sales recorded in October 2023. This was 5.5 per cent below the 10-year seasonal average (2,784).

“Typically, reductions to mortgage rates boost demand, and the strong October sales numbers suggest buyers may finally be responding to lower borrowing costs after waiting on the sidelines for months,” Andrew Lis, GVR’s director of economics and data analytics said. “To some market watchers, this rebound may come as a surprise, but with four consecutive rate cuts from the Bank of Canada – and more likely to come on the horizon – it was only a matter of time until signs of renewed strength in demand showed up.”

There were 5,452 detached, attached and apartment properties newly listed for sale on the MLS® in Metro Vancouver in October 2024. This represents a 16.9 per cent increase compared to the 4,664 properties listed in October 2023. This was 20 per cent above the 10-year seasonal average (4,545).

The total number of properties currently listed for sale on the MLS® system in Metro Vancouver is 14,477, a 24.8 per cent increase compared to October 2023 (11,599). This total is also 26.2 per cent above the 10-year seasonal average (11,475).

Across all detached, attached and apartment property types, the sales-to-active listings ratio for October 2024 is 18.8 per cent. By property type, the ratio is 13.4 per cent for detached homes, 22.5 per cent for attached, and 22.2 per cent for apartments.

Analysis of the historical data suggests downward pressure on home prices occurs when the ratio dips below 12 per cent for a sustained period, while home prices often experience upward pressure when it surpasses 20 per cent over several months.

“While the strength in October's numbers is encouraging, one data point does not make a trend," Lis said. "Recent data shows that market conditions have been decidedly balanced, with prices easing over the past few months. With the recent uptick in sales however, the attached and apartment segments are now tilting toward a seller’s market with the detached segment not far behind, suggesting the recent period of price moderation may be nearing an end."

The MLS® Home Price Index composite benchmark price for all residential properties in Metro Vancouver is $1,172,200. This represents a 1.9 per cent decrease over October 2023 and a 0.6 per cent decrease compared to September 2024.

Sales of detached homes in October 2024 reached 724, a 25.5 per cent increase from the 577 detached sales recorded in October 2023. The benchmark price for a detached home is $2,002,900. This represents a 0.3 per cent increase from October 2023 and a 1 per cent decrease compared to September 2024.

Sales of apartment homes reached 1,393 in October 2024, a 33.4 per cent increase compared to the 1,044 sales in October 2023. The benchmark price of an apartment home is $757,200. This represents a 1.6 per cent decrease from October 2023 and a 0.6 per cent decrease compared to September 2024.

Attached home sales in October 2024 totalled 501, a 40.7 per cent increase compared to the 356 sales in October 2023. The benchmark price of a townhouse is $1,108,800. This represents a 0.4 per cent increase from October 2023 and a 0.9 per cent increase compared to September 2024.

Key Datasets:

• North Vancouver (VNV):

  • MLS® HPI Price: $1,392,300 (October 2023)

  • Sales: 194 (October 2023)

  • Total Inventory: 606 (October 2023)

  • Sales to Active Ratio: 32% (October 2023)

• West Vancouver (VWV):

  • MLS® HPI Price: $2,658,100 (October 2023)

  • Sales: 53 (October 2023)

  • Total Inventory: 593 (October 2023)

  • Sales to Active Ratio: 9% (October 2023)

Comparative Analysis:

• Price Changes:

  • Over the past year, North Vancouver's MLS® HPI Price increased by approximately 4.5%, while West Vancouver saw a rise of around 3.4%.

  • In the last five years, North Vancouver's home prices surged by about 48%, whereas West Vancouver experienced an increase of approximately 38%.

• Sales and Inventory Changes:

  • In North Vancouver, the number of sales increased by 47% over the last year, with a 9% decrease in total inventory.

  • West Vancouver saw a decrease of 11% in sales and a 7% decrease in total inventory over the same period.

• Sales to Active Ratio:

  • North Vancouver has a Sales to Active Ratio of 32%, categorizing it as a seller's market.

  • West Vancouver, with a Sales to Active Ratio of 9%, is considered to have a balanced market.

Percentage Changes (1 Year Ago, 5 Years Ago, and 10 Years Ago):

• North Vancouver:

  • 1 Year Ago (October 2022):

    • MLS® HPI Price: +4.5%

    • Sales: +47%

    • Total Inventory: -9%

  • 5 Years Ago (October 2018):

    • MLS® HPI Price: +48%

    • Sales: +78%

    • Total Inventory: -18%

  • 10 Years Ago (October 2013):

    • MLS® HPI Price: +106%

    • Sales: +83%

    • Total Inventory: +28%

• West Vancouver:

  • 1 Year Ago (October 2022):

    • MLS® HPI Price: +3.4%

    • Sales: -11%

    • Total Inventory: -7%

  • 5 Years Ago (October 2018):

    • MLS® HPI Price: +38%

    • Sales: +16%

    • Total Inventory: -23%

  • 10 Years Ago (October 2013):

    • MLS® HPI Price: +50%

    • Sales: -51%

    • Total Inventory: -23%

Market Condition Analysis:

• North Vancouver is currently in a seller's market, indicating high demand and low supply. In contrast, West Vancouver's market is more balanced.

• Both areas have experienced significant price growth over the past decade, with North Vancouver leading in percentage increases.

• The Sales to Active Ratio in North Vancouver suggests a competitive market, while West Vancouver's ratio indicates a more stable environment. The most recent month's data in both areas appears typical of their recent trends, aligning with the broader market conditions observed over the past year.