We recently had one of our REALTOR partners ask us if we could explain the difference between being PRE-QUALIFED VS. PRE-APPROVED.

Different lending institutions are going to use the terms differently and even interchangeably.   However for us at the Mainstream Mortgage Team these terms mean.

PRE-QUALIFIED: We would use this term for a client who has used some online calculators or our app to generate a purchase price or pre-qualification certificate. It gives them an idea of what they can afford but none of their documents nor credit report have been reviewed.

PRE-APPROVED: Client has completed a formal application and submitted to us. We have checked and reviewed their credit report, identified and corrected any issues. We have reviewed all of their application documents. We have verified their employment. We have confirmed their income through a combination of income documents that would be necessary for their application(Employment letter, paystubs, T4s, Tax Returns, Notices Of Assessment, Pensions, CPP, OAS, CCB etc.). We have confirmed their down payment. (Savings, RRSP, TFSA, Gift from family member, sale of existing home, sale of other assets). We have determined the clients comfort level in terms of monthly payment and budget and have discussed different mortgage products, rates and terms (Fixed vs. Variable, Purchase + Improvements, FTHBI – First Time Homebuyer Incentive etc.). So for us, a pre-approval is a fully underwritten application by us. In the even of an iffy application we will send to a lender for review. If we feel rates are going to increase will will submit to lock in the pre-approval rate for 90-120days.

The important thing to note is that in either case, the home the client purchases will still need to be evaluated by one of the insurers or appraiser.  We are unable to ever give our ok to write an unconditional offer to purchase.  We always recommend that clients get a home inspection and include a financing condition with every offer to purchase.