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23 Jan

The Ins & Outs of Pre-Approvals


Posted by: Cory Lewis


1.Gas Station Sushi

2.Emails from Nigerian Princes

3.60 Second Online Mortgage Pre-Approvals


Not all mortgage pre-approvals are created equally.

Many lenders offer quick and easy pre-qualification numbers for their clients and others will issue written pre-approval letters without any documentation requirements. As we all know, this can lead to heartache down the road when a deal goes live and an offer to purchase is in place.

My clients are offered a fully underwritten Pre-Approval.


The Top 3 Questions clients have about Mortgage Pre-Approvals:


  1. What is an Underwritten Pre-Approval?

A fully underwritten preapproval ensures that not only we take a full application, but we collect and review the client’s paperwork upfront. This is not standard practice in the industry unfortunately.  A client’s ability to qualify for a mortgage hinges on 4 main criteria– Their provable income, their down payment, AND their credit bureau showing their ratings and liabilities. Collecting and reviewing this information upfront helps us avoid any confusion or disappointment at the time of purchase. Through no fault of their own, clients often misrepresent their information on a mortgage application.

For example, with an online application a client may advise that their annual income is $120k, (understandably basing this on their tax return info from the previous year). However, every lender has their own rules and document requirements for proving and accepting various income sources. Unless this is 100% salaried income – we need to investigate further to determine the income that can be used – IE: Hourly rates, shift premiums, taxable benefits, support payments, child tax credits, and  self-employment income are all handled differently.


  1. If I am Pre-Approved, Why do I need a Finance Condition in my Offer?

I will always advise any client who requires a mortgage, preapproved or not –make their offer conditional to financing. The reason for this is that the client themselves is only half of the equation. The lender also has to approve the property in question, and this cannot happen until a written offer to purchase is in place. A lender may approve a client but decline a property. This could be due to any number of reasons, for example, a lower appraised value or special assessments that are disclosed once reviewing the condo documents.

Clients also need to be aware that a preapproval is based on their information at the time of application. If there are any material changes to their information (new debts, income or employment changes etc.) this can also affect their approval at the time of purchase. I always advise my clients contact me before making any material changes or applying for any new loans or liabilities.


  1. Does a Pre-Approval come with any Obligation?

The answer is NO.

Most Pre-Approvals are good for 120 days and come with a rate hold for that period. If you decide not to purchase or use this preapproval it simply expires after that 4 months. It can be cancelled at any time or renewed at expiry if desired. The main benefit to the rate hold is that it does protect the client from any rate increases over the 120 period.

Another great advantage to working with a Mortgage Advisor who has access to  many lender options is that we will always shop around again for our clients  at the time of purchase . If some time has passed since the pre-approval was issued, we may find a better rate or product on the market and opt not to proceed with the lender who pre-approved you.