July 17, 2018

Pre-Qualified or Pre-Approval?

With the spring housing market heating up, you may want to make an offer on a house without a condition on financing.  I wanted to clarify how to receive a valid Pre-Approval.  I have had 2 referrals lately that told me that they had been pre-approved for their mortgage, when in fact it was as good as the paper it wasn’t written on!

Typically, when you go to your lending institution stating you are buying &/or selling a home, they will take your basic information, crunch some numbers and tell you what amount you qualify for.  Unfortunately, this is not an accurate pre-approval.  When I do a pre-approval for my clients, I actually pull a credit check and request income confirmation i.e. T4’s or tax returns.  This is especially important for Business For Self and hourly/contract individuals.

The other aspect to consider is that the house you are buying is an important part of the lending process.  Is it a ‘fixer-upper’ or is it a lovely home that anyone would want to live in?  Because of this fact, most lenders won’t even look at doing a pre-approval without a purchase agreement.

What you really require is a letter of confirmation stating that based on the information provided, you have been approved for a mortgage up to a particular amount to give you the assurance to write an offer without a “Subject to Financing” clause.

With all the variations and permutations within the lending guidelines, for the typical consumer, this is one area where discussion with an experienced broker is time well spent.

Colleen Saunders is a 20 year veteran in the mortgage industry, serving Mississauga, Burlington, Oakville and Toronto and offering all mortgage related services such as 2nd mortgages, private mortgages and more.

To contact Colleen, please fill out the form on  www.mortgagesbycolleen.ca  or call 416-459-2406