Mortgage Pre-Approval in BC: Does It Commit You?

Before you start making offers on homes in British Columbia, a pre-approval helps you know your budget. Many shoppers worry that getting one means they must borrow from that lender.

This article explains what a pre-approval is, how the rate hold works, and who is committed to what. It also covers how your down payment and mortgage loan insurance can affect the final loan.

This article covers the law of British Columbia.

What a pre-approval is

Lenders review your assets, income and debt to estimate the most they might lend and at what rate. The process does not guarantee approval.

The amount is a ceiling, not a commitment. The final amount depends on the property's value and your down payment, the property must meet the lender's standards, and the lender can still refuse after pre-approval.

How long the rate hold lasts

The rate can be locked for 60 to 130 days depending on the lender. Each lender sets its own terms.

FCAC suggests asking how long the pre-approved rate is guaranteed, whether you automatically get a lower rate if rates fall, and whether the pre-approval can be extended.

Who is committed?

Because the terms are set by each lender, you are not bound to the lender to close, but the lender is not firmly bound to lend. Treat the pre-approval as useful planning information rather than a promise.

If you make an offer on a home, ask about conditions with a lawyer before you rely on the pre-approval. How a particular contract treats financing depends on its wording.

Down payment minimums that shape the loan

Your pre-approval is only a starting point, because the final loan depends partly on your down payment. The federal minimum is 5% of the purchase price if the price is $500,000 or less. 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.

For example, on a $1 million home the minimum is 5% of $500,000 ($25,000) plus 10% of $500,000 ($50,000), which is $75,000, but only if the lender and insurer accept it. The insured mortgage price cap rose from $1 million to $1.5 million effective December 15, 2024. One federal page still shows older $1 million wording, so for a home between $1 million and $1.5 million, check with your lender.

Normally the minimum down payment must come from your own funds. As an exception, CMHC lets some buyers of one- or two-unit homes with a strong credit history use a non-traditional down payment, such as an unsecured personal loan or line of credit, at 90.01% to 95% loan-to-value. Rental or investment properties are not eligible for CMHC's 5%-down homeowner product, so confirm the minimum equity for a rental purchase with the lender or CMHC.

What lenders usually ask for

• ID
• Proof of employment
• Proof of your down payment and closing costs
• For self-employed borrowers, two years of CRA notices of assessment

The down payment also affects the final loan. Mortgage loan insurance is typically needed if the down payment is less than 20% of the purchase price. A lender may require insurance even with 20% down, usually if the borrower is self-employed or has a poor credit history.

CMHC says mortgage loan insurance protects the lender if the borrower cannot make payments. 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 and pay over time. Insurance is not available on homes priced at $1.5 million or more, so a buyer at that price needs 20% down and an uninsured mortgage.

• Up to 65% loan-to-value: 0.60% premium
• 65.01% to 75%: 1.70%
• 75.01% to 80%: 2.40%
• 80.01% to 85%: 2.80%
• 85.01% to 90%: 3.10%
• 90.01% to 95%: 4.00%, or 4.50% with a non-traditional down payment

What to do next

• Gather your documents before you apply.
• Write down the date your rate hold ends.
• Ask whether you can extend the pre-approval.
• Ask what happens if rates fall.
• Ask your lender whether the home you have in mind qualifies for mortgage loan insurance.
• Avoid taking on new debt before closing.
• Speak with a lawyer before removing financing conditions on an offer.

How all of this applies depends on your situation, the lender and the contract you sign, so it is worth confirming the details with the lender and a lawyer.

Frequently asked questions