- A pre-approval is an estimate of your maximum mortgage and likely rate, and it does not guarantee approval.
- Before final approval the lender checks the property, and the final amount depends on the property's value and your down payment.
- Even with a pre-approval certificate, you must still get final lender approval during the conditional offer period.
- Plan for the possibility of a smaller mortgage, a higher rate, a larger down payment or a co-signer.
You have a pre-approval letter in hand and you are ready to make an offer. It is natural to wonder whether the bank has now promised you the money. In most cases it has not, and the gap between a pre-approval and the lender's final approval is where many buyers get surprised.
This article explains in plain language what a pre-approval is, what the lender still has to confirm before closing, and how that fits with the conditions in an offer to buy a home in Ontario. It is general information, not advice on your own file.
What a pre-approval actually is
A mortgage pre-approval is an estimate of the maximum mortgage you may qualify for and the rate you are likely to pay. The lender arrives at it after a credit check and a review of your income, debts and assets.
It is useful because it helps you set a realistic budget and shows sellers and agents that you have started the process. But it is not a guarantee of approval.
Many lenders will also hold the rate for a period. The rate lock is roughly 60 to 130 days, depending on the lender. If your search runs longer than the hold period, ask your lender what happens to the rate.
What the lender still has to confirm before closing
The pre-approval looked at you. The final approval also looks at the property. Before it approves the mortgage, the lender verifies that the property meets its standards.
The final amount depends on the value of the property and on your down payment. If something does not line up, the lender may offer a smaller mortgage, a higher rate, a larger down payment requirement or a co-signer.
In practice, the lender's final approval is the document people often call the mortgage commitment. The exact name, contents and conditions vary by lender, so read yours closely and ask your lawyer or mortgage professional to explain anything that is unclear.
- Your credit, income, debts and assets may be checked again before final approval, since life can change between pre-approval and closing.
- The property itself must meet the lender's standards.
- The mortgage amount is tied to the property's value and your down payment.
- The terms can change from what you expected, including the amount, the rate or the down payment needed.
Pre-approval and final approval side by side
| Point | Pre-approval | Final lender approval |
|---|---|---|
| What it is | An estimate of your maximum mortgage and likely rate | The lender's approval after it verifies the property meets its standards |
| Guarantee? | No, it does not guarantee approval | Needed during the conditional offer period even if you hold a pre-approval certificate |
| Depends on | Credit check and review of income, debts and assets | Property value and your down payment |
| Possible changes | Rate held for roughly 60 to 130 days depending on the lender | Smaller mortgage, higher rate, larger down payment or co-signer |
How this fits into your offer
An offer to purchase commonly lists the names of the parties, the price, inclusions, the deposit, the possession date, the expiry date and conditions such as an inspection and financing. A financing condition is how the final lender approval is built into the offer.
Having a pre-approval certificate does not remove the need to obtain final lender approval during the conditional offer period. If you waive the financing condition to make your offer more competitive, you are relying on your pre-approval alone. Talk to a lawyer before taking that step, because the consequences of not being able to close depend on the signed agreement.
Your down payment also affects what the lender can approve. CMHC states the minimum down payment is 5% of the first $500,000 of the price plus 10% of the portion above $500,000, and that gifts from immediate family and RRSP withdrawals are acceptable down-payment sources. Lenders may have their own requirements, including what they need to see for a gift.
If you are buying a condominium, CMHC advises making a satisfactory status (estoppel) certificate a condition of the offer. The corporation must give the certificate within 10 days of the request and fee, and may charge up to $100 including taxes. Your lender may also care about what it shows, such as the reserve fund and any special assessments.
What to do next
- Ask your lender in writing what is still outstanding after your pre-approval, and what documents it will want.
- Avoid taking on new debt or making large unexplained deposits between pre-approval and closing, since the lender reviews your finances.
- Keep track of your rate-hold period and its end date.
- Make sure your offer has a financing condition with enough time to obtain final approval.
- For a condo, request the status certificate and make it a condition.
- Have a real estate lawyer review the offer before you sign, and review the lender's final approval before closing.
If the lender comes back with a smaller mortgage or a larger down payment, speak to your lawyer quickly, while the conditions in your offer may still be open.
Frequently asked questions
Does a pre-approval guarantee I will get the mortgage?
No. A pre-approval is an estimate of your maximum mortgage and likely rate after a credit check and review of your income, debts and assets, and it does not guarantee approval. You still need the lender's final approval.
What does the lender check before final approval?
The lender verifies that the property meets its standards, and the final amount depends on the property's value and your down payment. It may offer a smaller mortgage, a higher rate, a larger down payment requirement or a co-signer.
How long does a pre-approved rate last?
Lenders can lock the rate for roughly 60 to 130 days, depending on the lender. Ask your lender for the exact period and what happens if it runs out.
Do I still need a financing condition if I have a pre-approval?
A pre-approval certificate does not replace final lender approval, which you must get during the conditional offer period. Whether to include or waive a condition is a decision to make with a lawyer reviewing your offer.
Sources
- CMHC – Mortgage financing options for new residents — cmhc-schl.gc.ca
- FCAC – Getting preapproved for a mortgage — canada.ca
- CMHC – Making an offer to purchase a home — cmhc-schl.gc.ca
- Condominium Authority of Ontario – Status certificates — condoauthorityontario.ca
Links go to official government, court and regulator pages. The law changes — confirm you are reading the current version.
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