Most buyers in Quebec obtain a mortgage pre-approval before visiting their first property. A financial institution reviews your finances and confirms your borrowing capacity, meaning the amount it would agree to lend you. That number sets the framework for everything that follows.
Without a pre-approval, you search based on an estimate. With one, you start from an amount a lender has already validated, and your offer carries more weight with a seller.
Here is why a pre-approval matters, the five steps to obtain one, and what can call it into question before you sign.
In brief
- A mortgage pre-approval confirms in writing the amount a financial institution would agree to lend you, before you begin visiting homes.
- The process is free, and a complete file usually receives an answer within 24 to 72 hours.
- Six documents are requested in most cases: proof of identity, proof of income, notices of assessment, bank statements, an overview of your debts, and proof of down payment.
- It remains valid for 30 to 120 days depending on the financial institution, and your mortgage rate stays reserved for that entire period.
- It does not guarantee the mortgage. The lender revalidates your situation and assesses the property before granting final approval.
What is a mortgage pre-approval?
A mortgage pre-approval is written confirmation of the amount a financial institution would agree to lend you to buy a property. After reviewing your financial situation, the lender provides a letter stating your borrowing capacity.
This step takes place before you start house hunting, because it defines the scope of your search. The amount you obtain influences the price range you target, but also the neighbourhoods and the types of properties worth considering.
Pre-approval and pre-qualification: what is the difference?
The two terms are often confused, but they do not carry the same weight. One is based on a complete review of your file. The other is based on what you declare yourself.
- Mortgage pre-approval: the lender reviews your entire file. It verifies your credit and your financial documents, then provides an official letter stating an amount, a reserved rate, and an expiry date.
- Mortgage pre-qualification: a quick estimate, sometimes called pre-eligibility. You declare your income and your debts, and an online tool or an advisor derives an approximate amount from them. No verification, no credit inquiry, no reserved rate.
Why obtain a pre-approval before searching for a property?
A pre-approval is not mandatory, but it changes several concrete things in your project. It affects how you search, and it affects how a seller reads your offer.
Searching for homes within your budget
You know the maximum amount available to you, which directs your search toward properties you can actually buy. That ceiling is not a target, however. Borrowing less than the maximum authorized often remains the more comfortable decision over the long term.
Reserving a favourable rate
Most lenders reserve the current interest rate for the full duration of the pre-approval. If rates rise between your application and the transaction, you keep the one stated in your letter.
The reverse also works in your favour. If rates drop, nothing requires you to keep the pre-approved rate, and you benefit from the one in effect at the time of signing. The reservation acts as a protective floor rather than as a commitment.
Showing the seller that you are serious
A promise to purchase supported by a pre-approval reassures the seller. It shows that your financing has already been assessed by a financial institution and that you have the means to complete the purchase. Many real estate brokers require this document before organizing visits.
Accelerating your final financing
Since part of the analysis is already complete, the lender confirms your financing more quickly once the property is chosen. You can therefore set a shorter deadline for the financing condition in your promise to purchase, which works in your favour with the seller.
Identifying problems before making an offer
The lender’s review sometimes reveals elements you were not aware of: an error in your credit file, a forgotten debt, income the financial institution does not count in full. At this stage, you still have time to correct the situation. Once your offer is accepted, the same discovery can compromise the purchase.
How to get pre approved for a mortgage loan
The process unfolds in five steps, from your financial review to the moment you receive your letter. The right time to begin is just before the visits start, once your down payment is saved and available.
1. Take stock of your financial situation
Before submitting an application, draw an honest picture of your finances: your income, your current debts, your credit history, and the amount available for your down payment.
This exercise is not only about preparing your file. It also shows you how a mortgage payment would fit into your monthly budget. A lender can approve an amount that your daily life would not comfortably support.
2. Choose your lender
There are two ways to obtain a pre-approval: go directly to a financial institution, or work with a mortgage broker.
- A financial institution reviews your file according to its own criteria and offers its own products. You receive a single offer, which remains the simplest route if you already bank there.
- A mortgage broker submits the same file to several lenders and reports the conditions offered by each one. These services are generally free for the borrower, since the broker is paid by the lender once the financing is finalized.
3. Gather the required documents
Your lender needs documents that support your application and allow it to validate what you declare. In most cases, this means:
- Proof of identity;
- Recent proof of income (pay stubs);
- Your notices of assessment for the past two years;
- Your bank statements;
- An overview of your current debts;
- Proof of down payment.
A complete file from the first submission speeds up processing considerably. It is often what separates a pre-approval received within 24 hours from one that stretches over a week.
4. The lender reviews your file
The lender first examines the main elements of your situation: your credit score, your income, your debts, the stability of your employment, and the amount of your down payment.
It then calculates your borrowing capacity using two debt service ratios.
- Gross debt service ratio (GDS): the share of your gross income devoted to housing costs, meaning the mortgage payment, property taxes, and heating.
- Total debt service ratio (TDS): the share of your gross income devoted to all of your debts, housing costs included.
One detail deserves attention. To perform this calculation, the lender does not use the rate stated in your contract, but a higher one. This is known as the mortgage stress test, and it serves to verify that you could continue making your payments if rates rose before the end of your term.
5. You receive your pre-approval letter
If your file is accepted, the lender sends you a pre-approval letter. It specifies three elements: the maximum amount granted, the mortgage rate reserved, and the expiry date.
Keep this document close at hand. Your real estate broker will request it before the visits, and it accompanies your promise to purchase when you submit an offer.
How long does it take to obtain a pre-approval?
A few days, in most cases. With a complete file and a stable employment situation, the answer usually arrives within 24 to 72 hours.
More complex files require additional time. The file of a self-employed worker, for example, often stretches to a week or more, while the lender obtains the supporting documents it needs.
How long is a mortgage pre-approval valid?
The validity of a pre-approval ranges from 30 to 120 days depending on the financial institution. Most major banks grant 90 to 120 days, while some alternative lenders limit it to 30 or 60 days.
This is the period during which your rate remains protected, and therefore the period you have to find your property.
What if I have not found a home before the expiry date?
If your pre-approval expires before you have found a property, you can repeat the process. The lender updates your file, redoes certain verification, and issues a new letter, this time at the rate in effect.
If your financial situation has changed since your initial application, the amount granted may be different.
Does a pre-approval guarantee that you will obtain the mortgage?
No. A pre-approval indicates that a lender would agree to grant you a certain amount based on your situation at the time of the review. Final approval covers two things instead of one: you, and the property you have chosen.
Before confirming the financing, the lender verifies that your financial situation has not changed, analyzes the property, and makes sure it meets its criteria.
This is why a promise to purchase almost always includes a financing condition. It gives you the time needed to obtain final approval, and it releases you from the transaction if your financing is refused.
What to avoid while your pre-approval is valid
A pre-approval is based on your financial situation as it stands at the time of the review. Any change before signing can reduce the amount granted, or even cancel the agreement. Five actions come up regularly in files that fall through.
Taking on new debt
Buying or leasing a vehicle, financing furniture, or opening a new credit card increases your debt ratios. The amount the lender agrees to grant you drops accordingly.
Changing jobs
Changing jobs, even for a better-paid position, can harm your file if it comes with a probation period, self-employed status, or commission-based income. What the lender looks at is the stability of your income, not only its amount.
Using your down payment
The lender wants to see that the money is available, and often requires it to have remained untouched in your accounts for a certain period. Using it, or making significant transfers shortly before closing, will require you to provide explanations.
Falling behind on your payments
A forgotten minimum monthly payment on a card or a bill paid late is enough to lower your credit score. Since your file can be consulted a second time before the financing is confirmed, a drop during the validity period can call the agreement into question.
Co-signing a loan for someone else
In the lender’s view, a debt you co-sign counts as your own, even if you never make the payments. Doing this favour for a relative during the validity period can therefore reduce your borrowing capacity.
Can a lender refuse to grant you a pre-approval?
Yes. A credit score that is too low, debt ratios that are too high, or an insufficient down payment can lead to a refusal. In most cases, however, it is not final.
Repaying part of your debts, increasing your down payment, or correcting an error in your credit file is sometimes enough for a new application to be accepted. A mortgage broker can also present your file to a lender whose criteria better match your profile.
Are you looking to get a mortgage pre-approval?
Habitam can help you in your efforts to find a mortgage broker. By telling us about your project, we will refer you to top-rated experts, free of charge! Simply fill out the form (it only takes 2 minutes) and you will be put in contact with the right experts.
