Mortgage pre-approvals are actually very useful. They give the homebuyer confidence on what they can afford when shopping for a home. But the term mortgage pre-approval is often misleading.

Mortgage Pre-Approvals Meaning

All mortgage pre-approvals are conditional. That means that the mortgage broker and the lender have looked at your circumstances and established that you can afford a certain mortgage amount. However, this is all based on the information that you have provided either verbally or with some minimal documentation. When the time comes for the homebuyer makes an actual offer, all or some of the information provided ahead of time needs to be proven. In other words, mortgage pre-approvals are in most cases very superficial. The lender takes your “word for it” that you have:

1. Usable income.
2. Credit score and history (even though the credit may be looked at in advance, it could change from the time the mortgage pre-approvals are given and the time the deal goes “live”).
3. Down payment from valid sources.
4. Chosen a home that the lender is comfortable lending on!!

In some cases, many lenders will even give mortgage pre-approvals just based on declared income and credit with no further checking of the details (or underwriting/evaluating). So in some cases, mortgage pre-approvals are not worth the paper they are printed on (in fact, some lenders don’t even print it). This is why it is important to be working with a good mortgage broker. A good mortgage broker will:

1. Ask the right questions and evaluate your ability to qualify for a mortgage more thoroughly than the lenders.
2. Know which lenders will actually evaluate and scrutinize the prospective homebuyer rather than just rubber-stamping it.

So why are mortgage pre-approvals important?

Well, a seasoned broker like Robert Floris will recognize warning signs and have a better understanding if you will qualify or not when the time comes. Equally as important, mortgage pre-approvals hold the rate! When a client gets mortgage pre-approvals, the rate at that time can be held for up to 120 days in some cases. That gives the borrower some peace of mind that if rates go up, they will still receive the rate quoted on the mortgage pre-approvals. The borrower also has nothing to lose by getting mortgage  pre-approvals because if the rates go down, they will receive the better rate at the time the deal goes live.

So buyer beware! Mortgage pre-approvals do not guarantee 100% that you will receive financing when the time time comes to purchase. That’s why it is advisable to work with a reliable mortgage broker that you can trust; one that won’t leave you hanging if the deal falls through. This is also why we always recommend to our clients that they at least make the offer condition on financing.

Work with a mortgage broker who always finds a way to win!!

Robert Floris is a Mortgage Broker. His office is located at 651 Fennell Avenue East in Hamilton, Ontario. If you would like to speak with Robert, he can be reached at 905-574-9200 #215. Alternatively, you can contact Robert here.

If you would like to apply for a mortgage online, please follow this link.

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