Join millions of Canadians who have already trusted Loans Canada
Apply Now

The process of purchasing a home can be intimidating and confusing at first glance. There’s plenty of research that needs to be done on different neighbourhoods, banks and lenders, and there are many requirements to fulfill in order to obtain a mortgage, including income, down payments, credit scores, and more. Furthermore, as a potential homeowner, you’ll need to consider budgeting, mortgage options and amounts, interest rates, and amortization periods. Two of the first steps of the mortgage process are the pre-qualification process, as well as the pre-approval process, both of which have historically been mistaken for the other and cause confusion, especially to first-time home buyers

What Does it Mean to Be Pre-Qualified?

The mortgage pre-qualification process can be described as a more casual, estimated version of a mortgage pre-approval. To get pre-qualified, an aspiring homeowner would provide their general financials, including their income, assets and debt, to the prospective lender. It’s important to note that the pre-qualification process does not require a credit check. The lender would then assess the information given and provide the borrower with an estimated projection of how much of a mortgage they will be eligible to receive. 

Learn how to better budget and save for a mortgage.

Pre-qualification is preliminary, and the number provided that indicates the mortgage amount is subject to change. However, despite the more precursory nature of the pre-qualification process, it’s a great opportunity for you to have conversations with your lender about your specific mortgage needs, as well as for your lender to share insights and mortgage options that they feel might be more suitable to your needs. Furthermore, the main benefit of getting pre-qualified is to give you a general idea about what you can expect to be eligible for.

The process can be completed quite casually, meaning a phone call or online assessment is often adequate to obtain a pre-qualification. 

Another benefit of pre-qualification comes when a potential buyer is ready to make an offer on a property. Having a letter of pre-qualification might comfort the seller if, for example, financing approval is a condition of purchase. 

Estimate Your Monthly Payments

CALCULATOR

Rate & Term 1
%
Loan Options 2
$
$
Result 3

Getting a mortgage? Check out how you can avoid the mortgage stress test.

What Does it Mean to be Pre-Approved?

Obtaining a mortgage pre-approval is a natural next step following a mortgage pre-qualification, but should only be done when the prospective homeowner is more serious about buying. A mortgage pre-approval provides a borrower with a more precise amount of money that they can expect to be approved for. The process is more detailed, taking more time to complete (up to a couple of weeks), and requiring potential borrowers to complete a full mortgage application and to provide a variety of documents, as documented by the Financial Consumer Agency of Canada, including your:

  • Assets
  • Debt 
  • Income
  • Identification
  • Proof of employment
  • Proof of capital to pay closing costs
  • Expenses and financial obligations, including:
    • Child or spousal support
    • Student loans
    • Lines of Credit
    • Car loans
    • Credit card balances

Moreover, lenders may require a few documents to verify your employment, including:

  • Recent pay stubs to verify your wage or salary
  • Employment letter from your employer, documenting the length of your employment and salary
  • Notice of Assessments from the CRA if you own your own business

It’s also possible to get more than one pre-approval by exploring different options from different lenders. Although this will mean each lender will conduct a credit check, it’s important to note that these are soft credit checks that will not affect your credit score. 

Pre-Approval, Interest Rates and Rate Holds

Obtaining a pre-approval can give you a better idea about what the interest will look like on your mortgage. You might be able to lock in an interest rate, also known as a rate hold, through your mortgage pre-approval process, though this relates to fixed rates, not variable rates. The benefit of locking down a rate is if your lender’s fixed-rate goes up between your pre-approval and approval, you are safely locked into your pre-approval rate. 

Rate holds are usually valid for 60-day, 90-day, or 120-day periods, depending on your lender and your application. It’s important to note, however, that a rate hold doesn’t guarantee your approval of the mortgage. You can still be refused based on many types of criteria they have that they feel you weren’t able to meet, including changes in your financial situation. 

Check out how lender set their rates and how you can beat them.

How Long is a Pre-Approval Valid For?

Although validity periods of pre-approvals vary by lender, most potential homeowners will be approved for between 90 and 120 days. Sometimes, lenders will even offer extensions on your pre-approval period, though you will need to resubmit your financial documents again to do this. Nonetheless, the pre-approval period gives you a minimum of 3-4 months to seek out your new home. 

Check out if you should use the entire pre-approval amount when getting a mortgage?

Main Differences Between a Pre-Approval and a Pre-Qualification

While pre-qualifications and pre-approvals both provide mortgage amounts that a borrower can reasonably expect to be approved for, the two processes have a number of differences, as outlined in the chart below:

Pre-QualificationPre-Approval
Credit CheckNot requiredRequired
Length of Process1-4 daysVaries between a few days to two weeks
Interest RatesInterest rate estimate, but not guaranteedLocked in fixed interest rate for up to 120 days 
DocumentationGeneral answers about borrower’s financial situation are accepted without extensive documentationExtensive documentation on borrower’s finances, credit, debt obligations, and employment required
Level of ReliabilityRough estimate on mortgage amountCalculated estimate on mortgage amount with written commitment from lender

Should You Get a Pre-Approval or a Pre-Qualification?

It’s helpful and necessary to obtain both a pre-qualification and pre-approval, albeit at different stages of the mortgage process. 

When Should a Consumer Get a Pre-Qualification?

Prospective home buyers should consider obtaining a pre-qualification at the earliest point of time when considering purchasing a home. This allows the homebuyer to consider their budget while obtaining insight into a lender’s options, as well as their own needs and goals.

When Should a Consumer Get a Pre-Approval?

Prospective home buyers should consider obtaining a pre-approval when they are more involved in the home buying process, ideally within three months of the expected purchase date of their new house. This is because pre-approvals last up to 120 days in most cases. A pre-approval will also strengthen a potential homebuyer’s offer in a bidding war if the sale is conditional on financing. 

Frequently Asked Questions

How does a pre-approval help me buy a house? 

Pre-approvals encourage you to narrow down your house pool and look at houses that are more realistic to your budget and pre-approved mortgage amount. It also helps speed up the buying process, as a seller will be more comforted that you can handle the financing necessary for the house. 

How fast can I get a mortgage pre-approval?

A mortgage pre-approval can take a few days, or a few weeks depending on your individual scenario. For example, it may take a lender longer to verify financial information from someone who is self-employed. If a prospective buyer has a poor credit rating, this may also result in added time to the process for the lender to consider the application. 

Can I secure a rate with a pre-qualification? 

No, pre-qualification mortgage amounts are only estimates; however, mortgage pre-approvals can offer a secured interest rate for up to 120 days.  

Final Thoughts

The process of obtaining a mortgage can be daunting, with many terms and processes that a prospective homebuyer should ensure they are familiar with. Learning the difference between pre-qualification and pre-approval is necessary to keep a prospective buyer on top of their financial planning and to strengthen their offer on a house when the time comes.

Chrissy Kapralos avatar on Loans Canada
Chrissy Kapralos

Chrissy is a Toronto-based communications advisor. With an English degree from the University of Toronto and editing courses under her belt from Ryerson University, she has continued her lifelong passion for writing and editing. In addition to working for Loans Canada on a variety of financial topics, Chrissy has a few years of resume writing and editing under her belt, and takes great pleasure in helping people find work that fits with their experience and passions. When she isn't working, you can find her practicing yoga, hanging out with her dog, reading up on financial and real estate news, or planning her next trip abroad.

More From This Author

Special Offers

More From Our Experts

https://loanscanada.ca/wp-content/uploads/2019/11/Home-equity-loan-canada.png
How To Borrow Using Your Home Equity In 2023

By Lisa Rennie
Published on June 1, 2023

Do you have equity in your home? Find out how you can get a home equity loan in Canada and how much you can borrow.

https://loanscanada.ca/wp-content/uploads/2023/05/Keepa-Review.png
Keepa – Amazon Price Tracker

By Bryan Daly

If you want to shop or sell on Amazon, you need to know about Keepa. Keepa is a browser extension that tracks Amazon prices and

https://loanscanada.ca/wp-content/uploads/2023/05/Used-car-loans.png
Should You Get a Loan for a Used Car?

By Bryan Daly

Used cars loan can help you purchase a car even if you can’t pay it outright. The question is, should you get a loan for a used car?

https://loanscanada.ca/wp-content/uploads/2021/12/Best-Credit-Cards-For-Low-Income-Earners.png
Best Credit Cards For Low Income Earners 2023

By Lisa Rennie

If you're worried about qualifying for a credit card because you have a low income, check out these credit cards for low income requirements and great...

https://loanscanada.ca/wp-content/uploads/2023/05/Credit-memo-canada-.png
Why Did You Recieve A Credit Memo In Canada?

By Bryan Daly

Have you ever received a credit memo in Canada? Wondering why you got it? If you’ve ever returned a product, you may receive a credit memo instead of ...

https://loanscanada.ca/wp-content/uploads/2020/04/Personal-Loan-Alternatives-.png
What Do You Need To Borrow Money In Canada?

By Lisa Rennie

When you need to borrow money, there are many options to choose from. But finding the right option can be hard. Let's find out which one is right for ...

https://loanscanada.ca/wp-content/uploads/2023/05/Loans-like-Fairstone-1.png
5 Loans Like Fairstone You Should Know

By Lisa Rennie

If you are looking for loans like Fairstone, you can find them on Loans Canada. These Alternative lenders offer secured and unsecured loans.

https://loanscanada.ca/wp-content/uploads/2023/05/Car-Value-in-Canada.png
What Is My Car’s Value In Canada? 5 Ways To Find It

By Lisa Rennie

Here are 5 online ways to estimate a car value in Canada. A car is a valuable asset that you can use to borrow money or to sell for profit.

Recognized As One Of Canada's Top Growing Companies

Loans Canada, the country's original loan comparison platform, is proud to be recognized as one of Canada's fastest growing companies by The Globe and Mail!

Read More

Why choose Loans Canada?

Apply Once &
Get Multiple Offers
Save Time
And Money
Get Your Free
Credit Score
Free
Service
Expert Tips
And Advice
Exclusive
Offers

Build Credit For Just $10/Month

With KOHO's prepaid card you can build a better credit score for just $10/month.

Koho Prepaid Credit Card