- The pre-approval confirms how much a lender agrees to lend you.
- It protects your rate for a certain time and avoids crushes that are out of budget.
- It is free, no obligation, and it changes your position as a buyer.
What it is, and what it is not
The pre-approval is a document from your financial institution or your mortgage broker that confirms, after checking your income, your debts and your credit, the amount they agree to lend you and at what rate.
It is not a pre-qualification, which is only a quick estimate without verification. And it is not yet the final approval: that comes at step 8, once a specific property is in play. But between the two, the pre-approval is the document that counts.
What it gives you
Three things. First, your real budget: you know exactly which price range to look in, and you avoid the visits that end in disappointment. Then, a protected rate for a certain time: if rates rise during your search, you keep yours; if they fall, you get the new one.
Finally, weight. When you make an offer with a pre-approval in hand, the seller knows your financing is serious. When two offers look alike, that is often what makes the difference.
How to get it
Prepare your proof of income (pay stubs, employment letter, notices of assessment for the last two years), your savings and down payment statements, and the list of your debts. A self-employed worker adds financial statements or tax returns.
You can go through your bank or a mortgage broker, who compares several lenders. Either way, it is free. And if you do not know who to turn to, write to me: I will give you names, no obligation.
Frequently asked questions
Does the pre-approval force me to use that lender?
No. It commits you to nothing. You remain free to compare and choose another lender at final approval.
Pre-approval before visits, always. It sets your budget, protects your rate for a certain time and gives weight to your offer. Free and no obligation.
- Gather pay stubs, notices of assessment and savings statements.
- Choose: your bank, or a mortgage broker who compares for you.
- Get the pre-approval in writing and note its expiry date.
- Take on no new debt before the purchase.
Sources : Financial Consumer Agency of Canada, getting a pre-approval · CMHC, financing your home
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