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Understanding Pre-Approval vs. Pre-Qualification: Key Insights for Homebuyers

Today, we’re diving into a topic that’s been on many of our clients’ minds: the difference between pre-approval and pre-qualification, and whether you should secure your rate before next week’s rate announcement. Check Out our latest video where we explain why fixed rates may be going up this week, even if the Bank of Canada keeps its rates the same.


What is Pre-Qualification?

Pre-qualification is a preliminary step where we run through your numbers based on the information you provide. We don’t verify your details or check your credit; instead, we take your word for it and hope the interest rates stay the same or get better by the time you find a house. This process gives you a general idea of what you might qualify for, but it’s not a guarantee.

Why Opt for Pre-Approval?

Pre-approval, on the other hand, is a more rigorous process. We verify your information, check your credit, and secure a mortgage rate hold for you, which can be beneficial for several months. This thorough process can give you a clearer picture of your financial standing and provides a rate lock that protects you against potential interest rate hikes.

Common Objections to Getting Pre-Approved

Why not wait for rate cuts

Objection 1: Waiting for Lower Rates

Many buyers hesitate to get pre-approved because they anticipate the Bank of Canada lowering interest rates. However, predicting rate drops is uncertain. If rates do decrease, we can update your rate hold to reflect the new, lower rates. Conversely, if rates rise, having a rate lock already in place will save you from higher costs. Therefore, there’s no risk in securing a rate hold now.

it will take too much work

Objection 2: Too Much Work

Some buyers feel it’s too much work to get pre-approved or worry about not finding the right home immediately. However, the pre-approval process is relatively quick, often taking about 40 minutes for the online application and discussion. Having a pre-approval enables you to act swiftly when you find the right home, making your offer more competitive and reducing the risk of missing out due to financing delays.

Won't it hurt my credit score?

Objection 3: Impact on Credit Score

Another concern is the potential impact on your credit score. While it’s true that a credit check for mortgage purposes is a hard inquiry, it has a lower impact than other types of inquiries. Additionally, if multiple checks are done within a short period (45 days), they count as a single inquiry, minimizing the impact on your credit score. Early credit checks also help identify and address any issues long before you’re ready to buy.

Benefit of being pre-approved

Benefits of Getting Pre-Approved

1. Rate Protection: A pre-approval with a rate hold protects you against rising interest rates while allowing you to benefit from any decreases.

2. Stronger Negotiating Power: A pre-approval letter can make your offer more attractive to sellers, increasing the likelihood of acceptance.

3. Clarity and Confidence: Knowing your financing is in place gives you the confidence to make offers and proceed with your home search without stress.

Final Thoughts

Even if the upcoming rate announcement is neutral, there’s still a chance that fixed rates could rise in reaction. Securing your pre-approval and rate hold now allows you to shop with confidence, knowing exactly what you can afford. This preparation not only reduces stress but also positions you favorably in negotiations.

We encourage you to reach out to us. Josh and our team are here to help you get your pre-approval done, so you can focus on finding your dream home. Follow us on Youtube for more weekly insights, and don’t forget to like, subscribe, and click the notification bell to stay updated!





Josh Tagg has been the owner of Mortgages For Less since 2006. During that time Josh has developed a reputation for being an industry leader and advocate for client education.


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