When shopping for a home, the first step should be to get a pre-approved mortgage. But don’t be fooled, a pre-approval is not the same as a pre-qualification. A pre-approval is when your lender collects and verifies the information you’ve provided, whereas a pre-qualification is based on the information you’ve provided, but which has not been confirmed.
When you have been truly pre-approved for your mortgage, you have provided your lender with confirmation of your income, your down payment, had your credit report checked, and all that is missing is the property. Remember though, that because you still have to find that perfect property, there still could be the requirement for an appraisal, depending on your lender and whether or not you are getting a high-ratio mortgage (there are currently three mortgage insurance companies in Canada – CMHC, Genworth and Canada Guaranty, and you are required to have approval/insurance coverage from one of them if you finance more than 80% of the value of your house), so be sure to include a financing clause in your offer to allow time should an appraisal be required.
Once you’ve found your dream home and are ready to proceed with an offer, yours may just attract more attention from the seller because your realtor can ensure them that you have been fully pre-approved, which means you can lift your conditions sooner than someone else who may not have been pre-approved at all.
Having a pre-approval in place before you look for a home also helps takes some of the ‘stress’ out of what can sometimes be a whirlwind time in your life. By getting the paperwork out of the way ahead of time, you can move your focus to the hunt for the perfect home!