THE MORTGAGE PRE-APPROVAL PROCESS: WHAT YOU NEED TO KNOW BEFORE YOU HOUSE HUNT
Buying a home is one of the biggest financial decisions you’ll ever make—and it all starts with getting pre-approved for a mortgage. Whether you’re a first-time buyer or returning to the market, understanding the mortgage pre-approval process will help you shop smarter and give you a competitive edge.
In this post, we’ll walk you through the step-by-step mortgage pre-approval process, explain why it matters, and share tips to help you get the best possible outcome.
What Is Mortgage Pre-Approval?
Mortgage pre-approval is a lender’s commitment—based on a detailed review of your financial situation—to loan you a specific amount of money for a home purchase. It’s not the final approval, but it tells you (and sellers) how much you can afford and that you’re a serious buyer.
Why Is Pre-Approval Important?
• Sets your home search budget
• Gives you a rate hold (usually 90–120 days)
• Makes you a stronger buyer in the eyes of sellers
• Uncovers potential financial issues early
Step-by-Step: The Mortgage Pre-Approval Process
1. Check Your Credit Score
Your credit score is one of the biggest factors lenders use to assess your application. In Canada, a score of 680+ is ideal. Before applying:
• Review your credit report for errors
• Pay down existing debts
• Avoid applying for new credit
2. Gather Your Financial Documents
To assess your financial health, lenders will ask for:
• Government-issued photo ID
• Recent pay stubs (2–3 months)
• Tax documents (T4s and/or Notice of Assessment for past 2 years)
• Bank statements (typically 90 days)
• Records of savings, investments, and assets
• Information about any outstanding debts
3. Calculate Your Budget
Use an affordability calculator to estimate how much house you can afford based on:
• Your gross monthly income
• Your current debt obligations
• Your down payment
• Estimated taxes and utilities
Lenders use two key ratios:
• Gross Debt Service (GDS) Ratio – housing costs vs. income
• Total Debt Service (TDS) Ratio – all debt payments vs. income
4. Meet with a Mortgage Professional
You can work with a bank, credit union, or an independent mortgage broker who can compare options from multiple lenders. They will:
• Review your documentation
• Pull your credit report
• Advise on rates and terms
• Recommend mortgage products tailored to your goals
5. Receive Your Pre-Approval Letter
If all goes well, you’ll receive a pre-approval letter stating:
• The maximum mortgage amount you qualify for
• An estimated monthly payment
• The mortgage interest rate (locked in for a limited time, often 90–120 days)
This letter doesn’t guarantee final approval, but it gives you a strong foundation for your home search.
6. Begin House Hunting With Confidence
With a pre-approval in hand, you’ll:
• Know your price range
• Be in a stronger negotiating position
• Move quickly when you find the right home
Important Things to Keep in Mind
• Pre-approval is not final approval. The lender will still need to assess the specific property and re-confirm your finances when you make an offer.
• Don’t make major financial changes (like quitting your job or financing a new car) between pre-approval and final approval.
• Pre-approvals expire, so keep track of your rate hold period.
Getting pre-approved is one of the smartest moves you can make when buying a home. It helps you shop within your means, gives sellers confidence in your offer, and positions you for a smoother closing process. Take the time to get organized, speak with a mortgage professional, and make your home-buying journey less stressful—and a lot more successful.