The Difference Between Being Pre-Qualified & Pre-Approved for a Mortgage
One of the most important steps, before going out to look at homes, is to find out how much you can afford to spend and what you are comfortable paying. It is key to find a Mortgage Specialist through a bank or brokerage that you feel comfortable with and that has the ability to access different lending options. When you speak with a Mortgage Specialist make sure you know whether you are being “pre-qualified” or if you are being “pre-approved”. There is a big difference between the two options:
You may have looked online and seen that you can be pre-qualified for a mortgage by using a mortgage calculator or filling out a quick questionnaire based on your general assets and expenses. This “pre-qualification” is a quick step to give you an idea of what you would be able to afford based on your income and expenses. This is just a quick, general idea of a starting point to look at what you qualify for. There is no guarantee that this is what the bank is prepared to lend you and you also are not provided with an interest rate or any other mortgage terms. None of the information that you provide is verified and no credit check is done to validate any of the information provided.
When meeting with your Mortgage Specialist to be “pre-approved” it is important to have specific information with you in relation to your employment, wage(s) earned, T4 information, assets, expenses and SIN. A credit check is a necessary step to perform through the Mortgage Specialist so you can be pre-approved for a specific amount of money. Being pre-approved with a credit check gives you an accurate affordability figure to base what you should be seeing with your Realtor. When you are “pre-approved” through the Mortgage Specialist you will not only be given a number on what you can afford but you will also be given a Mortgage Interest Rate that you will be charged. The interest rate you get will be based on many different factors, such as the current prime rate, your credit score and your down payment amount. This interest rate is usually “locked-in” for you and will be honoured by the financial institution for a period of approximately 90-120 days.
It is important to let your Realtor know whether you were “pre-qualified” or “pre-approved” before seeing any homes. We typically do not show anyone homes until they are “pre-approved” because the “pre-qualification” process really does not mean anything in regards to what the bank will actually be prepared to lend you. It is never a good feeling when you go through the whole showing and offer process only to find out during the conditional phase that the Buyer actually wasn’t pre-approved by the lender and unfortunately do not qualify for near the amount of money required for the home they are attempting to purchase.
For more information about the differences between being “pre-qualified” and “pre-approved” or to get a list of exceptional Mortgage Specialists in the area please give HomeLife Emerald Realty Ltd. Brokerage a call at 705-424-0770.
Bill Forsyth Sales
Broker of Record/Owner