Pre-Qualification is a review of:
- Application Details
- Servicing Ratios (the numbers)
- Credit Report
Pre-Approval is when:
- Pre-qualification is completed
- Material documents reviewed
Does either guarantee final approval?
No, but it provides as much security as you can have at this point. Reason being, there are conditions to approval which cannot be met until you find a property and have an accepted offer to purchase in place. Standard conditions listed below.
A seasoned broker will understand the lender and insurer guidelines well so if any of the above areas will require an exception* (when we go outside of the “rule box”) then we can work on that before your information actually goes into a lender/insurer. Exceptions can be minor items, or they can also be what holds an application back.
Note: These conditions cannot be completed until there is an Accepted Offer to Purchase
1) Lender Approval - Most lending underwriters do not review applications unless there is an offer to purchase in place.
2) Insurer Approval – If the down payment is less than 20%, then it is mandatory to attain default insurance. The Canadian Insurers are CMHC, Sagen (prev: Genworth) and Canada Guaranty. Your application cannot proceed without their approval and they will only review an application if there is an accepted offer to purchase.
3) Exception Approval – If an application requires an exception (see above*), it cannot be officially approved until the application is “live” (accepted offer to purchase).
4) Property to Meet Guidelines - Pre-qualification is always pending the property meeting lender and insurer guidelines. For example, property must be marketable and in reasonable condition, some lenders/insurers will not accept age restricted properties, electrical up to code etc…
5) Lender Verification of Documents – Once the lender/insurer approve the application, the lender reviews your documents for accuracy as to what was stated in the application. Once reviewed the lender will send notification of documents approved or they may request further information. This is why it’s important to get your documents to your broker as soon as possible for pre-checking.
Please note this is a general guide only and the lender/insurer may add conditions as necessary.