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Mortgage Pre-Qualification vs. Pre-Approval—Simplified
I know these terms can be explained in many ways, making them confusing. Let’s simplify what actually matters when getting a mortgage.
It all starts with choosing an experienced mortgage professional (pick me, pick me!). From there, I’ll review the following based on current mortgage rules:
✅ Your financial details (income, savings, debts)
✅ Your credit report (active accounts, history, limits)
✅ Your down payment source (savings, gift, equity, etc.)
✅ Lender & insurer guidelines (ensuring you meet requirements)
With this foundation, we can determine the best strategy for you and move forward confidently. Let’s get started!
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Mortgage Rules
An experienced mortgage broker understands lender and insurer guidelines thoroughly. If any aspect of your application requires an exception (meaning it falls outside standard rules) we can address it before submitting your information to a lender. These exceptions can range from minor details to factors that may otherwise delay approval.
Key Application Factors
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Application Details: Includes employment status, savings, and the source of your down payment.
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Servicing Ratios: Assesses income versus home-related debt and total liabilities.
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Credit Report: Ideally, you should have at least two active credit accounts, a two-year credit history, and a minimum credit limit of $2,500.
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Supporting Documents: Proof of down payment and employment verification.
Does Mortgage Pre-Qualification or Pre-Approval Guarantee Final Approval?
No, a pre-qualification or pre-approval does not guarantee final approval. These are initial assessments based on the information provided, but final approval depends on a full lender review, including:
Lender Approval
Lending underwriters do not review applications unless there is a firm offer to purchase in place. While a pre-approval can give you a strong indication of what you may qualify for, final underwriting typically occurs only after you have an accepted offer on a property.
Insurer Approval
Yes, if your down payment is less than 20%, default mortgage insurance is mandatory. In Canada, the three mortgage insurers are CMHC, Sagen, and Canada Guaranty.
Your application cannot proceed without their approval, and they will only review it once there is an accepted offer to purchase.
Exception Approval
If an application requires an exception (as noted above), it cannot receive official approval until it is live—meaning there is an accepted offer to purchase in place. Lenders and insurers will only review and approve exceptions once the full application is submitted with a property attached.
Property to Meet Guidelines
Approval is always pending the property meeting lender and insurer guidelines. The property must be:
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Marketable and in reasonable condition
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Up to code (e.g., electrical, structural soundness)
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Eligible under lender/insurer policies (e.g., some may not accept age-restricted properties)
Final approval depends on both the borrower’s qualifications and the property meeting lender and insurer requirements.
Lender Verification of Documents
Once the lender and insurer approve the application, the lender will review your documents to ensure they match the details provided in your application.
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If everything is accurate, they will send confirmation of document approval.
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If additional information is needed, they may request further documentation.
This is why it’s crucial to submit your documents to your broker as soon as possible for pre-checking—this helps prevent delays and ensures a smoother approval process.
This is a general guide only—lenders and insurers may impose additional conditions as needed. Each application is reviewed on a case-by-case basis, and requirements can vary based on the lender, insurer, and specific details of the application.