Since rates are expected to begin rising and continue on the incline throughout 2022, if you’re planning to buy property anytime soon, it makes sense to secure a rate hold so you don’t have to worry about missing out on the best rate while you’re home shopping.
A rate hold is like having insurance on your fixed mortgage rate – you no longer have to worry about rates increasing while you find your new home over the next 90-120 days. This is particularly important in hot housing markets when multiple bids are a reality as it may take longer than expected to purchase a home.
Should I get preapproved for a mortgage?
Of course, a rate hold is exactly how it sounds – it doesn’t mean you’ve qualified for a mortgage. And, while a preapproval also doesn’t guarantee you’ll get a mortgage, your chances are much higher if you maintain your credit, income and debt levels up to the time you receive an actual approval on a specific property.
Obtaining a preapproval is highly recommended before you even begin house hunting so you understand what you can comfortably afford to spend on a property. During the process, your lender will thoroughly assess your finances and creditworthiness to determine whether you meet the requirements to secure financing.
If you’re preapproved, you’ll receive documentation verifying that you have the financial means to make an Offer to Purchase. This represents a conditional commitment from your lender to grant you the mortgage you seek but in no way is a final mortgage approval. That’s why it’s essential to always include a condition of finance in your Offer to Purchase even if you’ve been preapproved for a specific mortgage amount.
When it’s time to draw up the Offer to Purchase, your lender will want to verify that you still meet the qualification criteria as well as assess the property’s value and suitability. If there are changes that could possibly derail the process, you could be denied a mortgage despite having been preapproved.
Have questions about rate holds, preapprovals or your mortgage in general? Answers are a call or email away!