This is an important first step in the home-buying process. Do you know how much house you can afford? You don’t want to start house-hunting and fall for a home you can’t afford. Pre-approval helps you in other ways. Consider this scenario. A home seller gets two similar offers. One is accompanied by a letter from the buyer’s bank that states she is preapproved for a mortgage in the amount of the offer. The other has no supporting documents. Which offer do you think the seller will consider first? Plus, there may be problems with your credit that you don’t know about. Your credit is one of three factors that will be considered before you get approved for a mortgage. The other two are income and your down payment. You will need 20% down if you want to avoid paying CMHC’s mortgage default insurance. It’s calculated based on the size of your mortgage and how much money you have down. Of course the bigger the down payment, the smaller your loan (and overall interest charges) will be. One way to help boost your down payment is to borrow money from your RRSP. First-time buyers can pull out $25,000 tax-free and have 15 years to pay it back. If you’re buying with your partner, you can contribute $50,000 together.