Mortgage Pre-Approval is a document showing ability of the borrower to bid on a property. This is a preliminary stage where the mortgage has not yet been approved or purchased. Such approval is provided by the bank or mortgage broker to the potential home buyer, which could be used by the buyer to carry a self-evaluation.
If you are already through the pre-approval process, you are just one step away from the final approval or purchase of the mortgage. Although many borrowers in Canada skip the pre-approval process, however it has its own usefulness in the overall mortgage process.
Benefits of Pre-Approval
A mortgage pre-approval lets you analyze and evaluate the services offered by the lender, before making the final decision. You can even stand down from the offer, as the mortgage pre-approval does not make you liable to the bank or mortgage broker.
Mortgage pre-approval provides you complete and detailed information about the value of home you can afford, offered mortgage rate and monthly mortgage payments. You can compare these specifics with your own affordability and negotiate it with your lender, if required.
Once you are pre-approved for a mortgage, the rest of the mortgage process will be quite smooth and easy for you. With such kind of pre-approval, you can avail the mortgage amount in weeks rather than months.
Pre-Approval vs. Pre-Qualification
In pre-qualification, the lender provides the borrower with an estimated amount of how much a buyer can qualify. These estimations are based on the verbal information provided by the borrower. Pre-approval on the other hand, gives the accessible amount with more precision. Such precise amount is calculated from the documentary evidences provided by the borrower about his assets and earnings.
Although a pre-approval is not itself a commitment of mortgage, it however helps the borrower to speed up the approval process and foresee the financial liability.