The difference between Pre-Qualification, Pre-Approval and Approval?
So often do I get clients thinking they have been qualified for a Mortgage, only to realize they only have a rate held for them and the banks haven't reviewed anything...
I'm here to give you an understanding of the terminology the industry uses!
When a lender tells you that you've been Pre-Qualified, this means that the lender has reviewed your information - such as income docs (T4s, T1s, etc), your credit, and your liabilities. This is a more firm qualification than a Pre-Approval, however, it doesn't happen often in today's industry.
A mortgage pre-qualification can be useful as an estimate of how much someone can afford to spend on a home, but a pre-approval in today's terms, really just means a rate hold. A Mortgage professional will look over your documents and determine how much they believe you can afford based on lender guidelines and will submit your deal to a lender. The lender will NOT look at a document until the deal goes "live", but they will give you a rate hold for 90-120 days for you to begin searching for a property.
Getting pre-approved is one of the best things you can do to simplify the process and give yourself more confidence in your buying power. Preapproval lets you know how much you can borrow with minimal risk.
Buyers benefit from consulting with a lender/broker and obtaining a pre-approval letter. This allows them the opportunity to discuss loan options and budgeting practices and they will come to better understand their own credit and get a head start on any problems that may occur throughout the process. The homebuyer will also learn the maximum amount they can borrow, which will help set the price range.