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Mortgage Basics: Pre-Approved Vs. Pre-Qualified

What’s the diff?

There are different stages of the Canadian mortgage rate approval process when you apply for a mortgage and it’s important to know what they are and what they really mean.

What is Pre-Qualification?

This is the first step of the low mortgage rate approval process where your mortgage broker looks at your total income and debt.  The broker will calculate your affordability by looking at your debt ratios (Gross Debt Service GDS and Total Debt Service (TDS)).

There will be a number of conditions that you must meet in the pre-qualification before it is fully approved.

What is Pre-Approval?

Once completed, the mortgage broker will submit your application to a lender who validates your information with a certificate of approval. This typically comes with a Canadian mortgage rate guarantee, which is usually valid for 60 and 120 days.  You will need to meet all of the terms and conditions before approval is granted.

What is Approval?

You have been fully approved for the home loan at the best mortgage rate outlined in the contract.

Benefits of a Mortgage Pre-Approval

A mortgage per-approval allows you to lock in an interest rate.  It provides additional security in knowing that you meet the initial financing requirements.  It also lets any seller know that you’re a serious buyer. 

Most importantly, you know exactly what you can afford when you’re buying a home.

Documents Needed for a Pre-Approval

  • Personal identification
  • Income details
  • Bank accounts
  • Loans and other debts
  • Proof of financial assets
  • Verification of the down payment and funds to cover the closing cost 

Every home hunt starts with a mortgage pre-approval. Start your quick online application now.