Mortgage Approval

What does it mean to be pre-approved for a mortgage? When you first meet with a Real Estate Salesperson you may be asked if you are pre-approved. The first question you will be asked what price range you’re looking to buy in. The second question will probably be if you are pre-approved for this amount. 

Pre-approval means that you have spoken to a mortgage professional, whether it be with a bank or mortgage company, and obtained approval for a certain amount of money in which to purchase a new, or new-to-you, home. Now comes the tricky part. How firm is that amount you think you have to spend? 

A local mortgage professional I know shared this story;  

“ clients came to me on a second opinion advising they had been pre-approved by their bank.  When I dug further into the conversation the personal banker populated their gross income into their program (no debt inquiry/no credit inquiry/no down payment inquiry- no advice) and told them to go a head and make an offer on a home at "x" price range.

When I did the pre-approval what they were told they "qualified" for ended up beingnearly $100,000 less than what they would be approved for. This made a significant difference in what homes they planned on viewing. They were upset in the beginning and then appreciative that they did not waste their Real Estate Salespersons time, a sellers time and were not embarrassed had they made an offer and been declined.”

This is only one event. Another is when a couple were approved for a certain mortgage amount and started shopping for homes within that approval amount. They were unaware that their credit score was that good, so after being approved and submitting an offer on a home, they purchased a new vehicle. This dramatically changed their mortgage approval amount, so when when the offer was accepted and they went for financing they were told they no longer were approved for the initial amount. Therefore the home they wanted fell due to financing. 

There are many factors to consider when buying a home. Financing is but one major piece of the puzzle. It is, however, a piece that is frequently misunderstood. Be sure to take the time to know exactly what you are being pre-approved for and what it means to you. There are many things to consider. Here’s an example;

What is in a pre-approval :

•income qualification and employment history i.e. no probation- with pay stub

•no income tax arrears (that can't be paid in advance of funding) 

•credit check

•payments based on customer preferred budget and what they qualify for if higher (with this information the customer can make a decision on what they buy when they are shopping without wondering if they qualify outside their preferred budget)

•down payment confirmation - determine the source

•closing costs - what they need and do they have it

•deposit with offer


•mortgage plan 

This is the most important purchase of your life. Be sure you’re informed. Your REALTOR® can help. They know industry professionals and it is their job to help you get the best advice possible.