In a recent news article it was reported that 1 million new Canadians came to…
Mortgage Pre-Approvals are NOT Guarantees of a Mortgage!
I recently had the pleasure of interviewing Chad Watts of The Mortgage Group about mortgage pre-approvals. He brought up a very important point for Buyers, particularly First Time Home Buyers. And that is a mortgage pre-approval is NOT a guarantee that you will get a mortgage at the amount the Lender originally mentions or get a mortgage at all.
What is a Mortage Pre-Approval?
This is a preliminary estimation by a Lender of how much the Lender will loan you based on very basic information. This number is subject to change based on what property you get an accepted offer on and the details of your financial situation.
Why Your Mortgage Pre-Approval may not match the Mortgage You Get!
A mortgage pre-approval is a basic guideline of generally how much a Lender thinks they can give loan the Buyer. Once the Buyer finds their dream home and has an accepted offer subject to financing on the property they need to forward the offer onto the Lender. The Lender then begins to go over all the details of the property and the Buyers financial situation with a fine tooth comb. This is often where the disparities between the Mortgage Pre-Approval and the actual mortgage pop up.
Too Much Debt, Inaccurate Financial Information, Unpaid Taxes, and Leaky Condos
There are certain buildings that Lenders will not lend money on for various reasons (Its a leaky condo, its not worth what the accepted offer says its worth, there are issues with the title). Sometimes the information the Buyer originally provided the Lender is not accurate or out of date (Buyer is behind on their taxes, or doesn’t have as much money as they thought, or may have too much debt). Both of these variables can result in the Buyer either not getting a mortgage at all or not getting as large a mortgage as they had anticipated.
The CHMC has a cool tool that you can use to test your financial situation to see if you are ready for home ownership that you might find useful.
Totally off topic – Check out the Tightrope Walker in the background of the video!
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There was confusion for this as some people thought that the preapproval meant that they would get the mortgage. However, as you can see from the article, this is not true.