There are different stages of approval process when you apply for a mortgage and it’s important to know what they are and what they really mean.
This is the first stage in the approval process. This is the step where your mortgage broker looks at your total income and debt and gives you a rough idea of how much you can afford to borrow, or in other words, the amount of money that you would qualify to receive from a lender.
The broker will calculate your affordability by looking at your debt ratios (Gross Debt Service GDS and Total Debt Service (TDS)).
Once you have a pre-qualification in hand, this often means that you have a rate hold for 30-120 days. However, this is not a guarantee. There will be a number of conditions attached to the pre-qualification before it is fully approved. At this stage the lender hasn’t even seen your mortgage application.
This is where the mortgage lender reviews the application (in part or in full) and agrees to provide you with the funds at a set interest rate, based on the terms of the contract. Pre-approvals sometimes involve a more thorough check of your credit history and documentations (this is usually the mortgage broker pulling the credit check, not the lender).
If you are working directly with a bank mortgage specialist, you will typically jump right to this stage in the approval process.
Once the institution validates your information they will provide you with a certificate of approval, this typically comes with a rate hold of up to 120 days.
Rate Hold: The length of time, typically between 60 and 120 days, that a lender will guarantee a loan's interest rate once you are locked in.
Again, a pre-approved mortgage is not a guarantee of being approved for the mortgage loan. You will need to meet all of the terms and conditions before approval is granted.
This is your golden ticket. You have been fully approved for the home loan at the interest rate outlined in the contract.
Getting pre-qualified and pre-approved is a very important step when looking for a mortgage. Here’s why:
When you get to the pre-approval stage, here’s what you’ll need to show your bank or broker: