Embarking on the journey to buy your dream home is super exciting, yet it’s filled with important decisions. Think of it like getting ready for a big vacation. Before setting off, you want to know what you can spend on this trip. That’s where Pre-Qualification and Pre-Approval come into the picture, two key steps that might sound the same but are quite different.

Warm-Up: Pre-Qualification

Let’s say you’re just warming up, thinking about jumping into the home-buying pool but not ready to dive deep just yet. Pre-qualification is like dipping your toes in the water. It is a basic due diligence based on the information you provide to the lender on your income support and credit worthiness, any loans you already have etc. You also advise them on all of your assets and debts. The bank does a preliminary analysis of your supporting docs to advise how much you would be able to borrow as a ballpark. Generally, the credit check is not done at the pre-qualification stage, it is just based on the information you provided to the lender. And that's the reason pre-qualification is not a guarantee that you will be given a mortgage of the same amount. However, it is very helpful to give you a solid guideline on what target range you can consider to start your property searches.

Getting Serious: Pre-Approval

This is a more detailed process where a formal mortgage application is written for your eligibility. The lender would require a line-up of documents like - proof of employment, latest salary stubs, Notice of Assessments, assets and debt details, loan and lines of credit details identification docs etc. In the process of doing a pre-approval for you, the lenders will do a credit check as well with your consent. Once they have done their formal approval due diligence, the lender will generally provide you with the amount they can extend and the rate at which they can offer. The pre-approvals so provided are further valid for 90-120 days and differ from bank to bank, the lender provides a locked fixed rate for this duration. This gives you a stronger hold on your finances, and you can be much more confident when placing an offer for a property. 

The Right Move

Now the question comes whether it should be pre-approval or pre-qualification. The definite answer is pre-approval, especially when you are intent in making the Real Estate purchase in the next 3-4 months. This will give you a strong handle on the whole process with peace of mind and a negotiation edge with the Seller. The pre-qualification one should do when they are in a very primitive stage and they just want to tread waters and understand whether the Real Estate investment is possible or not in the first place. 

Both have their role in setting you up for success in the Real Estate journey and should not be overlooked. For any Real Estate advice you require, reach out to us and we will be happy to help. Take good care and talk to you soon!

Wish you all the very best! Reach out to our dedicated team at Elixir for any queries you have in Real Estate, and we will do our best to help.

Mudit Mehta 

Broker of Record

ELIXIR REAL ESTATE INC.

Off: 416-816-6001 | [email protected]