What is Mortgage Pre-approval?
A Mortgage Pre-approval marks a significant stage in the process, as it involves the lender assessing your credit and verifying your financial details. When you receive pre-approval, the lender is making a genuine commitment (subject to certain conditions like property valuation ) to provide you with a loan and often ,valid for 60 to 90 days. However, it's important to note that pre-approval doesn't guarantee a particular rate or mortgage from that lender, as circumstances may change between the pre-approval stage and when you're ready to make a purchase. Getting pre-approval will help you to shop within your budget. Additionally, you'll avoid spending valuable time viewing properties that exceed your price range.
In simple words, Pre-approval = Shop/Buy with Confidence = Less Stress
Normally, Lenders look at the following while issue the pre-approval:
Proof of Income
Credit
Assets
Application ( For pre-approval, the borrower has to provide personal information such as First name, last name ,address and Social Insurance number etc. depending on the lender's requirements and authorization permitting the lender to access their credit report.)
Some people get confused between Pre-approval and Pre-qualification
A pre qualification will use borrower's income, the lender's interest rate and amortization, but doesn't include checking Credit of the borrower, to calculate for how much borrower may qualify.
Use pre-qualification in the early stages of looking for a property and apply for pre-approval when you are ready to make an offer.