What's the difference between a pre-approval and an approval

There can sometimes be confusion regarding the difference between a pre-approval and an approval when it comes to mortgage financing. If you are pre-approved does that mean you can write an unconditional offer on a property? The quick answer is no.

A pre-approval means that the lender has held an interest rate for you (typically for 120 days) and has done a very light review of your information/credit history. Mortgage lenders do not have the resources to contact your employer or review all of the documentation that would be required to approve your mortgage, at the pre-approval stage. As your broker, I also take a look at your finances and ask you for a few documents to ensure your income is accurate before I submit your file to a lender to formally request your pre-approval. &Nbsp; 

NOTE: Any changes to your financial status after receiving your pre-approval could alter the amount you qualify for. These changes include, but are not limited to, changes to your marital status, employment changes, or taking on any new loans or increases to the amount owing on any credit cards or personal lines of credit. If you make any changes, please let me know immediately

It is important to note that a pre-approval Is not a guarantee that your mortgage will be approved. A pre-approval is a good indication that the lender will approve your mortgage but it is not a guarantee.

It is when you write an offer on a property that your mortgage application must go through the full underwriting process before final approval can be obtained.

Also, if your mortgage will be insured (you are putting less than 20% down), final mortgage approval is always subject to approval by the insurer and your application will not be reviewed or submitted to the insurer until you have written an offer on a property (the insurers do not review pre-approvals).

When you find a property you love, you will make an offer to purchase the property from the seller. You will need to make your offer conditional on financing approval. At this time, your application will be sent to your mortgage lender and the underwriting process will begin. The underwriting process involves the lender (and insurer, if applicable) approving the property as well as your information, in finer detail. During this process, the lender will review and verify all of your documentation and confirm your employment details. Consequently, I will be requesting a LOT more documentation from you during this time. I will need updated/additional income documents as well as confirmation of your down payment to submit to the lender.

Once your documents have been reviewed and approved by your mortgage lender and you have signed your mortgage documents, I will receive an email from the lender explaining that your financing conditions have been met which I will forward to you. This means that you are now approved and that you can remove the financing condition from your offer. It is important to never remove the finance condition from your offer to purchase until I have specifically given you the okay to do so!