Pre-Approved for a mortgage and ready to go? I think not.

What is a Pre-Approved Mortgage?

A pre-approved mortgage is a "tentative" promise from a lender that it will loan you a certain amount of money for the purchase of real estate, for a certain term and at a certain interest rate. In a pre-approved mortgage process, the lender will base its decision upon your income and credit score.

A pre-approved mortgage is a tentative determination by the lender to loan you a certain amount of money. It is NOT a final decision and is usually only valid for 90 to 120 days. The final decision may depend upon whether the appraisal of the real estate is high enough to protect the lender in the case of default, whether the title is clear, whether the property meets inspection standards, among a number of other factors. Typical pre-approvals will have some fine print that states the mortgage is subject to a final approval.

So why bother? If a pre-approval does not mean that you are approved, then what is the point in getting pre-approved?

There are two main benefits of getting pre-approved for a mortgage. The first, is a 120 day rate hold. The pre-approval protects the buyer in case interest rates go up while they are out looking at properties. The lender offers a 120 day rate hold, that states they will honour the rate at the time of the pre-approval provided the purchase closes before the 120 day window.


The other advantage of the pre-approval is to have a ball park figure of how much you are qualified for. Though it sounds basic, knowing how much you are able to spend before purchasing a home is always a good idea. If you know you are pre-approved for $200,000 and you have $35,000 for a down payment and closing costs, it makes little sense to be shopping for $400,000 houses. With a pre-approved mortgage, you know exactly where you stand before shopping for a home. In fact, many realtors will want to see a pre-approval before they will begin to help you look for a home.


Since your pre-approval is subject to a final approval once you make an offer to buy a property, we always suggest that clients make their offer conditional upon financing. This gives you five day window to get an approval from the lender which guarantees you the mortgage financing as long as you meet their conditions, such as proof of incoem, proof of down payment, etc.

If you or someone you know is looking to purchase a property make sure they know about pre-approvals. Perhaps we can help!