6 things you need to know about mortgage pre-qualification and pre-approval
By ATB Financial 22 June 2020 2 min read
As you make your way through your home buying journey, we know there are a ton of new words that can sound like a different language. For example, what’s the difference between mortgage pre-qualification and pre-approval and what do those words mean?
No need to worry—we’re here to be your home buying translators. Here are six things you should know about mortgage pre-qualification and pre-approval.
What’s mortgage pre-qualification?
Mortgage pre-qualification is the first step to pre-approval. It helps you to determine approximately how much you’ll be able to borrow and how much you’ll need for a down payment and closing costs. The mortgage provider won’t review your credit report or verify your financial information when pre-qualifying you. Instead, they’ll estimate how much you might eventually be approved for based on an overview of your finances including your income, assets and debts.
What’s mortgage pre-approval?
All pre-approval means is that a mortgage provider does some of the initial background checking in advance and commits to give you a specific interest rate if you’re fully approved for a mortgage within 90 days. You’ll want to decide on a mortgage provider before starting the pre-approval process—where the negotiation process (for that promised interest rate) begins.
What does pre-approval do?
It holds the interest rate that’s available at the time you’re pre-approved. It will also give you a price range you can shop within, and help instill confidence in your home seller that once you’ve made an offer, you’ll be able to close the deal.
When should you seek pre-approval?
Luckily, it’s a simple process—just one form to fill out and having your income verified. If everything looks good, you should be granted pre-approval within 24 hours. Pre-approved interest rates apply for a set amount of time. With ATB, it’s 90 days for a resale or 180 for a new build. With other financial institutions the rate holds anywhere between 90-120 days.
Is pre-approval a guarantee?
Pre-approval isn’t an all-out guarantee that a mortgage provider will actually fund your loan, but it’s as close as you’re going to get—and your home seller will want to see it. The lender will make actual loan approval conditional on an appraisal of the property you want to buy, validation of your down payment, a title report and other conditions.
After I make an offer, what happens next?
After you find your dream home and make an offer, you’ll have to wait about 72 hours for full approval from your mortgage provider, pending a house inspection and an appraisal. Overall, processing time for full approval including house a inspection and appraisal will take between two and three weeks from the time you make the offer to the time you can move in.