What You Need To Know About Mortgage Pre-Approvals


mortgage pre-approvalsMortgage pre-approvals are a standard practice in the industry today, but all pre-approvals are not the same. You need to know what you are getting when you receive a pre-approval.

Why Get Pre-approved?

Why bother with a mortgage pre-approval? Pre-approvals have several very strong benefits that are hard to ignore. If you approach a broker or a lender for pre-approval, they should go through your financial situation to measure your qualifications. The idea is to figure out how much you can borrow comfortably and what products suit your particular needs.

Locking In The Best Rate and Terms

Besides insuring that there are no hidden surprises on your credit report and figuring out much you can borrow. Pre-approval also allows you to lock in the best rate, even if interest rates rise. Lenders will normally guarantee your rate for 90 to 120 days. When the market is hot, as it is at this moment, the last thing that you want is delays. Waiting for approval after you put in an offer could mean that someone else closes the deal first. The effort involved in mortgage pre-approvals makes it a wise first step when you start shopping for a property.

Realtors will be more inclined to give you their best and sellers will give your offer more weight if you already have your financing in place. However it is very important to note that a pre-approval doesn’t mean you are approved and should waive financing.  If your mortgage is insured (less than 20% down), the insurer, whether CMHC or Genworth will still have to approve the deal once an offer has been accepted.

Getting Pre-Qualified

When you do start the pre-approval process, make sure that the process includes qualification for the loan, not just holding the interest rate for you. Not all lenders bother with going through your finances and this could give you a false sense of security. Nothing could be worse than finding out that you are not approved when you thought you were. Mortgage brokers are a good choice for pre-approval because they will work with you at no charge. This includes pulling a credit report and looking at your income and expenses. A mortgage professional knows the lender’s requirements for income, down payment, purchase agreement, property information, and credit and debt ratios. Their fee is paid by the lender when they match you with an appropriate product.

There is a general misconception that a pre-approval means making an offer without conditions. When in fact a pre-approval is specifically conditioned stating “subject to approval” and is more an understanding of what you can afford and at what rate.  Too many times have I heard of people saying their bank said they were pre-approved and they’ve made an unconditional offer. Only to find out the house appraises for less or the condo board is involved in a lawsuit. Talk to a professional at and make sure you understand the difference between approval and mortgage pre-approvals.

If you’re well-qualified, a good mortgage broker can also watch the trends. If rates look like they are dropping they can delay your pre-approval application to improve your rate. Mainstream lenders only do pre-approvals for their own products and to reduce their risk. Their primary focus is not your best interests or the best possible rate. Their goals are to maximize profits and are obligated to do so. They must always look out for their employers best interest.

Get Pre-approved Today

Finally, a mortgage broker can also help you sort through the huge array of products that are out there and find the ones that suit you best. A proper fit includes the longest guaranteed rate, the best rate and the best mortgage features. Things such as flexible repayment options, reasonable penalties for prepayment and good terms for moving or refinancing your mortgage are all important. Mortgages are a broker’s business and their business is highly competitive. Talk to one of our trained mortgage professionals who will help you to find the best products out there. Lastly, they will work with you at no cost to look out for your best interests when looking into mortgage pre-approvals.