A mortgage pre approval means you're qualified for a mortgage loan for a given maximum amount. You're also given an estimate for your monthly mortgage payments. Depending on the lender, an interest rate is locked in for 60 to 130 days.
It's important to note with a pre-approval you're not guaranteed to get a mortgage for that maximum amount. The final amount also depends on the purchase price of the property and the amount of down payment you have.
When saving money for your down payment it's important to also keep some money aside for closing costs, moving and other maintenance costs.
The process usually involves a pre-qualification first to give a high-level estimate, then a pre-approval to give a more accurate figure.
It's important to be pre approved before you start your home search so that you know how much you can afford. With the maximum mortgage amount, realtors can also do a better job showing you homes in your price range. In a competitive market having a pre-approval prior to seeing homes is preferred.
You can get a pre approval from a mortgage broker or a lender. Lenders lend money directly to you while brokers compare the options and connect you to one. Here are some common questions to ask your broker or lender:
Some examples of lenders include: banks (TD, Scotiabank, CIBC, etc.), credit unions and mortgage monoline lenders. Breezeful can do the shopping for you and compare up to 30 different lenders to get you the best mortgage.
Pre approvals are often confused with prequalifications. Prequalifications are rough estimates for what you can afford while pre approvals are more accurate because your personal finances are more closely looked at.
Here are some of the things needed by a broker or lender in order to pre approve you for a mortgage: