Last week Canadian Mortgage Trends published an article of the same title as this blog which exposed the misconceptions of realtors and borrowers alike when it comes to mortgage “pre-approvals”.

The biggest takeaway is: “virtually no lender actually offers a pre-approval that matches the marketplace’s definition”.  When I try to explain to borrowers that a pre-approval is really just a rate hold, they become confused and often ask why it isn’t just called a rate hold.  Great question!

Even lenders who internally refer to the process as a rate hold issue a pre-approval certificate to fuel the confusion.

So why is a pre-approval really just a rate hold?  From the lender’s perspective they see the pre-approval process as a bit of a waste of time.  Only one in ten pre-approvals ever becomes a live deal, meaning that the borrowers put in an offer on a property and submit the deal to the same lender for approval, so can be a waste of valuable resources.

For this reason when a file is submitted to a lender for pre-approval, they look through the information in the application, they MAY review the credit bureau and for a number of lenders, this process is automated so isn’t even reviewed by an underwriter.  What is missing for this to be a true pre-approval? 

  1. None of the documents that you submit are reviewed and accepted by the lender
  2. There is no property to verify fits the lenders guidelines
How can you using a qualified Mortgage Broker like me help?  Well first, my process is always, whether it’s a pre-approval or approval, to get documents up front so that I can be sure of the information we are submitting to the lender and I can be confident in your ability to qualify for the mortgage we are submitting.  If there are some short comings on the file, that’s ok too.  We have some time to work through the issues and get things corrected by the time you do make an offer on a property.
 
So while not a true “pre-approval” from a lender, it’s part of the service I provide.  My goal is to get you into the home you want and this is just step one of the process.
 
Contact me to get started today!