There is the difference!
I’d like to share, since one could get you the home of your dreams and the other will leave you dreaming of it.
Getting Pre-Qualifed is a great idea when starting to look for a new home, it gives you an idea of what you can afford, without looking to deeply at your personal financial circumstances. It can be done online, with mortgage calculators that say someone with your income should be able to afford this much home. But you can’t take this to the bank, you see they like to do their own research.
That is a Pre-Approval, the bank/mortgage broker will do a full search on your income, credit rating, assests/liabilities and issue a Pre-Approval, besides calculating your maximum purchase price, pre-approvals usually “lock in” an interest rate for a specified period (90-120 days) to protect you in the event mortgage rates rise. The lending institution will review your application and credit history to ensure they meet their guidelines. Once approved, the lender will issue;
-a “Pre-Approval Certificate” quoting the rate, expiry date, maximum mortgage amount,
-and any conditions of their approval.
A pre-qualification is usually good for 90-120 days depending on the lender and product. Once pre-qualified your fixed rate would also be locked in for a specified time frame. If interest rates go up the rate on your pre-qualification would apply as long as your mortgage closed within the specified time frame. If rates go down you would alsobenefit from the lower rates again within the specified time frame on your pre-approval.
Information Required in Order to Be Pre-Qualified for a Mortgage
• Ask your employer to prepare a letter on company letterhead outlining your name, base salary or hourly rate, normal hours worked per week, position and length of service. A recent pay stub and a copy of your T4 from last year may also be required.
• If commission sales, three years personal tax returns together with the Notice of Assessments from Canada Customs & Revenue Agency.
• If self-employed, three years personal tax returns together with the Notice of Assessments from Canada Customs & Revenue Agency, three years business financial statements, and three years business tax returns (if applicable).
• Note: New products have been launched to the where, with good credit, you can qualify for a mortgage based on your stated income. This type of mortgage was designed for the self-employed, including contractors, freelancers, consultants, commission sales professionals, or small business owners.
• Social Insurance Numbers (optional).
• At least 3 years history of residence and employment.
• Know your banking information (name of financial institutions, address, and type of accounts).
• Know your assets (what you own) and their value. i.e. cash amounts, stocks, bonds, RRSPs, car.
• Know your liabilities (what you owe). i.e. car loan, credit card balances, child or spousal support payments.
Other Articles in the Owning a Home Series:
Not intended to solicit business from anyone under contract with a REALTOR ®
Updated July 16th, 2021