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Why You Need a Mortgage Pre-qualification AND Pre-approval

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Many first homebuyers may not be aware of the steps that are required to obtain a mortgage. They may dive straight into a bank to seek for a mortgage and end up getting disappointed as they found out they do not have the qualifications for it. There are three steps a first time home buyer needs to take before finally getting a loan on their dream home to avoid disappointment and to save their time and money.

  1. Pre-qualification
  2. Pre-approval
  3. Final Mortgage loan


A mortgage pre-qualification is one step that most people tend to miss and even confuse with pre-approval. A pre-qualification looks at your affordability at your current situation. It takes your income, assets, debt, credit rating to estimate how much you can afford to borrow for a new home. This is a first step for first time homebuyers as this indicates how much house you are able to afford, and the budget you should keep in mind while you are planning to buy a house. This also is good indicator of whether and when you should start looking for a house based on your current financials. If yo

Keep in mind that the pre-qualification, as said before, is an indication of your affordability. It does not mean that you have qualified for a mortgage.

To get a FREE pre-qualification, message Agent ReVa!


A pre-approval is the second step towards getting a mortgage. It is when a potential  lender or a mortgage specialist examines your current financial situation to find out the maximum amount they can lend you, and the interest that you will have to pay. The approved amount is also influenced by the value of the home of interest and your down payment, nor does not take into account other financial costs such as closing costs, moving costs, or even ongoing costs. To get a list of the documentation that is needed, check RateHub’s article on Mortgage Pre-Approval.

You do get an indication about the maximum amount you can afford to spend on a house, the monthly mortgage payment associated with the maximum price, and your mortgage rate for the first mortgage term. However, this is not a guarantee as all requirements (set by the lender) must be met before you are fully approved for a mortgage loan. This might be a disadvantage for some as if the property does not meet the lender’s qualification criteria, they might reject your mortgage application.

If everything checks out, you are given a rate lock of up to three months. What this means is that the rate you agreed on is protected if interest rates were to change while you are still looking for a house. If the rate increases, your lender will honour the lower rate you agreed to for three months so you can continue looking for houses.

Note: getting pre-approved for a maximum amount does not mean that it is the amount you should buy a home at, it only represents how much your lender is willing to lend you. You can buy a house that is less than the maximum amount which will ensure you have enough money in your budget for other costs.

Final Mortgage Loan

After the lender has decided to lend you money, you will have to negotiate the terms and conditions of the mortgage. Some of the items are:

  • The amortization period: the length of time it takes you to pay back this loan. This also determines how much you will be paying on a monthly basis. If you want to pay lower, then you may choose a longer amortization period. This can range from 20 to even 35 years.
  • If it is an open or closed mortgage: an open mortgage allows you to pay it in part of in full at any time during your decided term (length of your mortgage contract.) They are usually available for shorter terms of 6 months to a year, and the interest rate is higher. A closed mortgage remains unchanged throughout the term. The interest rates a lower, however, if you wanted to pay more than the decided amount or pay it off entirely, then a penalty of three months’ interest will occur.
  • If it is a fixed or variable rate: a fixed interest rate is one that does not change throughout your mortgage term. You pay a regular amount on a monthly basis until you have paid off your loan. A variable interest rate is a rate that changes based on the market during your mortgage period. If the rates go down, more money goes towards repaying your loan, speeding up the time you pay back your mortgage. If the rates go up, you pay more interest and less towards your loan. If the rates were to rise substantially, your lender may ask you to increase your monthly payment.

There are many conditions and terms you will have to negotiate. For more information, read the Government of Canada’s article on choosing a mortgage that is right for you.


Choosing a mortgage can be stressful. You may feel pressured to do something you are not comfortable with because that’s the way other people have done it. Do not stress it. Pick terms and conditions that suit your lifestyle and your budget!





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