What is a Mortgage Pre-Qualification?

So if you have been shopping for a home, chances are you have submitted information that has been used in "pre-qualifying" you for a home loan. Pre-qualification (also sometimes called a pre approval) is a term used in mortgage loan circles meaning that a loan officer has taken some information from you, the potential borrower, and made a tentative decision, but not verified much of, if any of it.



Typically in a pre-qualification, the potential borrower is asked for their social security number, their employment, income and asset information and the amount of current monthly debt. In addition the potential borrower is asked about their general credit worthiness. This information is then quickly worked up and contrasted against industry standards for qualifying credit scores and debt to income ratios.

Based on this quick work up the potential borrower will be told that they pre-qualify up to a certain mortgage loan amount. For example, if the borrower makes $3,000 / month this is then calculated to an industry-standard ratio of debt to income (which can vary depending upon mortgage loan program), for example 36%. So if a borrower makes $3000/month they would be pre-qualified at a total debt of $1080 (this includes any monthly payments, including car & credit card min. amount; along with the proposed payment of principal, interest, taxes and insurance).

Dependent upon the loan program you choose, other factors that may be included in determining your pre-qualification status...monthly residual income (that income remaining after paying all monthly obligations and family support), middle FICO score whether or not you are a first time home buyer, if the refinance has a "cash-out" amount requested, whether or not you have had a bankruptcy or foreclosure, how many times you have been late on a mortgage payment and how recently, your income type and the way you will verify your income (W-2, tax returns, bank statements, etc). Additionally, property type, property use, loan-to-value ratio (LTV), purpose of loan all play into the over all ability to qualify for a mortgage loan.


If you are preparing to shop for a home and will be seeking a mortgage loan, it would be a good idea to gather the following and allow your mortgage lender to review them thoroughly.

DO's and DON'Ts during your home shopping and home purchase periods.

DO save money
DO send payments on time
DO pay cash for common items
DO keep credit balances under 50% of credit limit
DO keep credit card accounts open even if balance is paid off or zero
DO keep down payment funds in one account with minimal activity

DO NOT open new credit accounts
DO NOT take out new consumer loans or other credit
DO NOT pay off collections (without consulting your Loan Counselor)
DO NOT buy a new car, truck or motor home (wait until after the close of escrow)
DO NOT close accounts with a zero balance
DO NOT pay down credit balances or pay off credit accounts (without consulting your Loan Counselor)

3 Huge Savings on Energy Efficient Home Building

One of the biggest trends in new home construction
in recent years has been the move towards Energy Efficient Housing. This design trend helps to make homes more cost effective to operate while at the same time working to minimize the impact on the environment of heating or cooling your home. Your new home can be a big user of energy, primarily for keeping the inside at a comfortable temperature for you and your family.

That's why keeping the following three things in mind when you are having your home built can end up saving you a lot of money on operating costs, not to mention reducing the home's impact on the environment. By installing energy efficient windows, by ensuring that your attic is properly insulated, and by using a high-efficiency furnace and water heater, you can help make your new home energy efficient and more comfortable.

Windows are an important design element in your home and everyone wants to have the best view from inside their homes. But windows can be a significant potential energy loss. A picture window in your home's living room can provide a stunning view and using energy efficient windows will help to keep thermal transmission to a minimum. This way, your living room can stay warm in the winter time and cool in the summertime without costing a fortune in heating and electrical bills. Talk with your builder about the his recommendations for the windows you want to make sure that they are energy efficient.

Attic insulation is another thing that can make a big difference towards ensuring a home is energy efficient. Heat transmission through a poorly-insulated attic can cause your heating and cooling bills to skyrocket. Insulation is rated in Canada by its "R" value, which is a measure of how well insulation resists transferring heat. Although building codes require at least R35, I would suggest insulating up to at least R50 standard to have an energy-efficient home and would encourage you to talk with your builder for more details.

Finally, high-efficiency furnaces and hot-water heaters are a must. Most if not all new furnaces sold in Canada today are high-efficiency as are hot water heaters. Also, the relatively new tankless hot water heaters allow you to heat only the water you need when you need it and can help in making your home more energy efficient than the standard hot water tank. Again, speak with your builder about the type of furnace recommended for your home, as well as the type of water heater.

By insisting that your new home has energy efficient windows, proper attic insulation, and high-efficiency furnaces and water heaters, you can make sure that your home is energy efficient, and that will not only save you money but will help the environment as well.