Pre-Approved VS Pre-Qualified 

While both pre-approval and pre-qualification are steps in the mortgage process, they are not the same. Understanding the distinction is important, especially as you get closer to purchasing a home.

What is Pre-Qualification? 

Mortgage pre-qualification is the initial step in determining how much you might be able to borrow for a home. You provide basic financial details like income, assets, and debts to a lender, who then gives you an estimate of your borrowing capacity without affecting your credit score. This estimate is based on a soft credit check, which doesn't impact your credit. It's a no-commitment way to understand your mortgage affordability.

Why is Pre-Qualification Important? 

While not mandatory in Canada, pre-qualification can be advantageous. It helps you understand what price range to consider when browsing real estate listings. Although pre-qualification estimates can change, they don't affect your credit score. Additionally, some lenders, allow you to lock in a mortgage rate for 130 days during pre-qualification.

How Does Pre-Qualification Work? 

To pre-qualify, you provide your financial information to multiple lenders if desired. This informal process gives a quick assessment of your financial status, making it the first step before more serious home buying actions.

What is Mortgage Pre-Approval? 

Mortgage pre-approval is a more detailed process than pre-qualification, meant for those serious about purchasing a home. You submit comprehensive financial information and undergo a credit check to receive an actual loan amount and interest rate. Pre-approval is more definitive, showing that a lender has committed to lending you a specific amount.

Why is Pre-Approval Important? 

Pre-approval isn't required but is beneficial. It provides a clear budget for home shopping and demonstrates to sellers that you're a serious buyer with financing ready. This can streamline the buying process and give you an advantage in competitive markets.

How Does Pre-Approval Work? 

To get pre-approved, contact a mortgage lender. The process includes a thorough review of your credit and finances. You’ll need documents like your Social Insurance Number, identification, and proof of employment. Each pre-approval involves a hard credit check, which may impact your credit score.

Differences Between Pre-Qualification and Pre-Approval 

Pre-qualification gives an estimate based on basic financial information, akin to window shopping. Pre-approval provides a concrete loan amount and interest rate after a comprehensive financial review. For serious buyers, pre-approval is more influential and shows sellers that you have secured financing, which can accelerate the home buying process in a competitive market.