Any time a new purchaser comes my way, the first thing I advise them of is to get that pre-approval. Of course I’m happy to help along each step of the way, but the goal is to get that first and crucial step completed.

You might ask yourself why you would jump into a mortgage before finding the home you want, but it’s important to understand that a pre-approval isn’t jumping into a mortgage at all.

A pre-approval might be best defined as your license to go house shopping. In essence there’s no sense in finding the home of your dreams if you’re not already 110 per cent sure you can afford if comfortably. There’s also no sense in spending your valuable time viewing homes that are not within your price range comfort zone. The worst thing that could happen is you realize that the homes you were looking at will stretch your wallet too thin, and then when you try moving down to the tier below, it’s a decline you’re not willing to make!

A pre-approval also locks in the interest rate at the time, for you, for a period of a few months. If you don’t end up purchasing until three months into the future when rates have gone up, your pre-approval guarantees you that original, lower rate. If the rate goes down, your lender will simply give you the new low rate.

Another reason it’s important to have your financing situation sorted out prior to going house hunting is so that you can take advantage of your readiness, should the opportunity to do so arise. In today’s market the hottest properties often attract competing offers. On many occasions I’ve seen vendors accept lower offers because they aren’t encumbered by a financing condition, giving the buyer an out, and making the offer less than firm. This in another way your pre-approval can save you a nice bundle of your hard earned money.

Most people have a budget which they’ve put together and verified for everything from vacations to the cars they buy. It only makes sense that a proper budget, or a pre-approval, be carried out adequately before beginning the single most important and largest purchase you are likely to make. Perhaps the most important reason to plan ahead, by sorting out your finances in advance, is not simply the money you can save because of it, but all that mental anguish and stress you save yourself from.

On a side note, as the market continues to be hot for new condo purchases, getting that pre-approval done prior to venturing towards that condo investment is of the utmost importance. I’ve had more than a few inquiries on a few new condo developments, for instance, where potential investors have realized that changes and alterations are required before they can jump on that bandwagon. The good news is that, if you have time, you have possibilities. As your parents used to say, do your homework.

– Amit is a Realtor/Developer with Re/Max. amitp@rogers.com