What is a Mortgage Pre Approval?
A mortgage pre approval is when a potential lender reviews your basic information, and provides an estimate of the maximum loan they would offer you, what your monthly payments would be, and at what interest rate. The term pre approval often gets used interchangeably with the terms pre qualification and rate hold.
During the pre approval process, the lender does not fully review all of your information or documents, so it is important to note that a pre approval is not a guarantee that the lender will give you a loan for the pre approved amount. The final amount of the loan will depend on a full review of your application, as well as the property you intend to buy.
Why Get a Mortgage Pre Approval in Canada?
The main reason for getting a mortgage pre approval in Canada is to get a better idea of how much home you can afford to buy. This allows you to save time by only looking at properties within your budget. Vancouver Mortgage Broker pre approvals are often valid up to 120 days, so you have plenty of time to begin shopping around for a home.
Having a mortgage pre approval can be a very useful tool for homebuyers because it shows they are serious about making a purchase. For someone selling their home, the last thing they want is for someone to waste their time by making an offer and have it fall through due to rejected financing. Having a pre approval tells them that you have done your homework and are serious about moving forward.
In addition to providing a rough budget to work with, a mortgage pre approval also locks in a certain rate. If rates start to rise during your home search, you don’t need to worry because your pre approved rate is locked in. And if rates start to fall, you’ll be granted the lower rate.
How to get Pre Approved for a Mortgage in Canada
As soon as you decided you’d like to purchase a home, you can move forward with a pre approval by reaching out to your mortgage broker. Fortunately, the pre approval process is very easy. Your mortgage broker will begin by asking you some general questions about your income, liabilities, and expected down payment. You’ll also be required to submit some supporting documentation. While each lender has varying mortgage pre approval requirements, below are some of the documents that may be requested as part of your pre approval:
- Government issued identification (like a driver’s license or passport)
- Proof of income (NOA, or pay stubs)
- Proof of down payment (copy of recent bank statement)
- Ability to pay closing costs (copy of recent bank statement)
- Assets (vehicles, jewellery, equipment)
- Debt information (child support, lines of credit, student loans)
What Happens After Getting Pre Approved for a Mortgage?
After you receive your pre approval you’ll have an idea of the maximum amount of money you’ll be able to borrow from the lender. Using this amount, you can start to look at homes in your price range.
Benefits of a Getting a Mortgage Pre Approval Online with Vancouver Mortgage
We understand that you’re busy and don’t want to waste your free time driving to and from various locations to pass off paperwork and fill out a mortgage pre approval application. For this reason, our Vancouver Mortgage Brokers can process your mortgage pre approval 100% online.
Getting a mortgage pre approval online is fast and easy. One of our agents will speak to you over the phone or email to ask some initial questions, and confirm the required supporting documents to complete your pre approval. All documents can be sent via email, which we will then upload securely and immediately to the lenders for review. Completing your mortgage pre approval online saves so much time; we can often get your pre approval back within one day!
Common Mortgage Pre Approval Questions
Whether you’re a first time home buyer in BC or it has just been a while since you’ve applied for a mortgage, even the very first step, the pre approval, can be a little daunting. Below we’ve compiled some of the most common questions we receive about mortgage pre approvals in Canada.
Where is the best place for a mortgage pre approval?
The best place to go for a mortgage pre approval is a mortgage broker. After asking you some key questions about your situation and goals, a mortgage broker will have an idea of the most suitable lender to pair you with. Being connected with a suitable lender increases your chances of being approved, compared to trying get an approval from a generic bank who may not have products or rates that suite your unique situation.
Does a mortgage pre approval hurt your credit score?
Each time your credit report is pulled, yes it does lower your credit score. Fortunately it is only by a few points, so this is one of the reasons it is so important to choose one mortgage broker and stick with them. Alternatively, if you ask ten mortgage brokers to do a pre approval for you and they all do a credit check, it will definitely have a negative effect on your score.
How long does a mortgage pre approval last?
For most lenders, the pre approval lasts for 120 days. This usually gives plenty of time for potential homebuyers to find a property they like, and get all their ducks in a row.
Am I committing to anything by getting a mortgage pre approval?
Absolutely not! A mortgage pre approval is completely free, and there are no strings attached. Once you have the pre approval you can start shopping around, but are in no way obligated to move forward with a mortgage right away.
Final Thoughts on Mortgage Pre Approvals in Canada
Deciding to prequalify for a mortgage allows you to have a good idea of what homes are in your budget, saving you time when home shopping as you can narrow your search to only homes within your budget. A pre approval can also give you piece of mind when it comes to rate, because if rates start to rise, the lender will still honour the pre approval rate they gave you originally.
For both of these reasons, getting a pre approval is a good idea. However, it is not a requirement and will not reduce your likelihood of getting approved for a mortgage. If you’ve already found a property you intend to purchase you are able to move straight to the application process without getting a pre approval.