Mortgage Pre-Approval in BC: What It Guarantees and What It Doesn't

You have found a lender who says you are pre-approved, and you are starting to look at homes in British Columbia. It is natural to treat that approval as a done deal. In practice it is an early estimate, and the details matter before you make an offer.

This article explains what a pre-approval does and does not promise, what lenders usually ask to see, and which questions are worth putting to the lender. It is general information, not advice on your own situation.

This article covers the law of British Columbia.

What a pre-approval actually is

When you ask to be pre-approved, the lender reviews your assets, income and debt to estimate the most it might lend you and at what rate. The process does not guarantee approval.

Think of it as a starting range for your house hunt. It helps you set a realistic budget and shows sellers and agents that you have done some groundwork.

Why it is a ceiling, not a commitment

The pre-approved amount is the most the lender might lend, not a promise to lend it. The final amount depends on the property's value and your down payment, and the property must meet the lender's standards.

The lender can still refuse after pre-approval. Terms are set by each lender. You are not bound to that lender to close, but the lender is not firmly bound to lend.

• The property's value may come in lower than the price you agreed to pay.
• The property may not meet the lender's standards.
• Your down payment may be different from what you planned.
• The lender may decide not to go ahead.

How down payment and insurance affect the final amount

Your down payment is part of what the lender looks at. For a price of $500,000 or less, the minimum down payment is 5% of the purchase price. For a price between $500,000 and $1.5 million, it is 5% of the first $500,000 plus 10% of the amount above $500,000. Normally the minimum down payment must come from your own funds.

Mortgage loan insurance is typically needed if your down payment is less than 20% of the purchase price. A lender may require it even with 20% down, usually if you are self-employed or have a poor credit history. The lender pays the premium but likely passes the cost to you, and you can pay a lump sum or add it to the mortgage. Because these costs shape the final loan, ask your lender how they fit into your pre-approved figure.

The rate hold and documents lenders ask for

Many pre-approvals let you lock the rate for 60 to 130 days, depending on the lender. Check the exact period in writing.

Lenders typically ask for the following documents:

• Identification
• Proof of employment
• Proof of your down payment and closing costs
• If you are self-employed, two years of CRA notices of assessment

What to do next

Before you rely on a pre-approval, put these questions to the lender. They are the ones FCAC suggests:

• How long is the pre-approved rate guaranteed?
• Do I automatically get a lower rate if rates fall?
• Can the pre-approval be extended?

Also ask what the lender will need to approve the property itself, and build conditions into your offer with your real estate professional. If your finances are complicated, a lawyer or mortgage professional can help you read the terms before you commit.

Frequently asked questions