Buying Your First Home
A mortgage pre-approval is an important starting point, but your finances and the property still need to meet the lender’s requirements before the mortgage receives final approval.
What Still Needs Approval
A strong pre-approval is important, but the final mortgage decision depends on two separate parts of the application.
Your financial situation must continue to support the mortgage.
The home must be acceptable security for the mortgage.
Example
Imagine you are pre-approved for a mortgage and begin looking at homes within the price range discussed with your mortgage broker.
Before making an offer, you finance a new vehicle. The new monthly payment increases your total debt obligations.
When the lender completes the final mortgage review, the car payment must now be included in your qualification. This may reduce the mortgage amount you qualify for or require the application to be reconsidered.
Speaking with your mortgage broker before taking on the new loan would allow you to understand the possible effect before becoming committed to the purchase.
Planning Insight
It is easy to treat a pre-approval as permission to move forward without any further conditions.
Understanding that the mortgage still needs final approval can help you protect your financing, avoid preventable changes, and make a more informed offer.
The Remaining Review
A mortgage pre-approval happens before you have chosen a specific property.
Your mortgage broker or lender reviews information such as your income, employment, debts, credit, and available down payment to estimate the mortgage amount you may qualify for.
Once you have an accepted offer, the lender completes a more detailed review. This includes confirming your documents and deciding whether the property is acceptable security for the mortgage.
Read: What Is a Mortgage Pre-Approval?Possible Changes
A mortgage may be declined if something changes or if the final review uncovers information that was not available during the pre-approval.
A change in employment or income
New debt, including a car loan, line of credit, or increased credit-card balances
Missed payments or a change in credit history
Documents that do not support the income, down payment, or financial information used
Changes to available down-payment or closing-cost funds
The property not meeting the lender’s requirements
An appraisal that does not support the purchase price
Changes to interest rates, qualification requirements, or lender policies
The Property Review
The lender is approving both the borrower and the property.
After an offer is accepted, the lender may review the purchase contract, property type, location, condition, marketability, appraisal, and other details.
Some properties may require additional review. Examples can include leasehold properties, certain modular homes, unusual construction, very small units, homes needing substantial repairs, or properties in locations that do not fit a lender’s guidelines.
A strong financial application does not automatically mean that every property will be acceptable to every lender.
See what happens when an appraisal comes in lowYour Financial Position
Yes. Your qualification is based on your financial circumstances at the time the lender completes its review.
Taking on additional debt can increase your monthly obligations and reduce the mortgage amount you qualify for.
A job change, reduction in income, or change in employment type may also require the lender to reassess the application.
Before financing is complete, speak with your mortgage broker before making a major purchase, opening new credit, changing jobs, or moving significant amounts of money.
Reducing Avoidable Risk
You cannot remove every possibility of a change, but you can reduce avoidable risks while the mortgage is being finalized.
Avoid taking on new loans or increasing credit-card balances
Continue making all payments on time
Speak with your mortgage broker before changing jobs
Keep your down payment and closing-cost funds available
Keep records showing where your down payment came from
Provide requested documents promptly and accurately
Discuss the property before removing a financing condition
Keeping your mortgage broker informed gives them an opportunity to review a change before it becomes a larger problem.
After the Offer
Your mortgage broker submits the property and supporting application documents to the lender for final review.
The lender may request updated income documents, bank statements, proof of down payment, confirmation of debts, property documents, or an appraisal.
The mortgage is not fully approved until the lender has completed its review and all approval conditions have been satisfied.
This is why a financing condition can be important. Your realtor, lawyer, and mortgage broker can help you understand the timing and responsibilities connected to your offer.
See what happens before you remove conditionsFrequently Asked
Clear answers to some of the most common questions about this topic.
No. A pre-approval is an initial review based on the information available at that time. The lender must still approve the property, verify your documents, and confirm that your financial situation continues to meet its requirements.
Yes. A change in employer, income, hours, probation status, or employment type may require the lender to reassess your application. Speak with your mortgage broker before making an employment change while buying a home.
A new car loan creates another monthly debt obligation and may reduce the mortgage amount you qualify for. It is best to review the potential effect with your mortgage broker before taking on the loan.
Yes. The lender must decide whether the property meets its guidelines. Property type, condition, location, appraisal, marketability, or other details may affect the decision.
The lender may base its mortgage decision on the lower appraised value. This could require a larger down payment, a lower purchase price, a different financing structure, or another review of your options.
A pre-approval is not final approval for a specific property. Before removing a financing condition, confirm with your mortgage broker that the lender has reviewed the application and property and that you understand any remaining conditions.
Free Home Buyer Resource
Use the BC Home Buyer Planning Guide to work through down payment planning, pre-approval, closing costs, and the decisions that come before an offer.
What to Explore Next
Here are a few related answers, guides, and tools that may help you take the next step.
Mortgage Minute
Understand what a pre-approval tells you, what may be reviewed, and why it is not a final mortgage approval.
Mortgage Guide
See how a lower appraised value can affect the mortgage, down payment, purchase price, and financing options.
Mortgage Guide
Follow what happens from an accepted offer through conditions, completion, and getting the keys.
Personal Guidance
A pre-approval is an important starting point, but it is not the final mortgage approval. I would be happy to review your plans, help you understand what may still need to be confirmed, and guide you through the financing process before you make an offer.
Need a Second Opinion?
I can help you work through the numbers and the next step.
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