Looking to buy a new property in Quebec? Before you start visiting homes, getting a mortgage pre-approval is strongly recommended. This step tells you the amount a lender could grant you and helps you set a realistic budget for your purchase project.
Mortgage pre-approval is often the very first step to take before house hunting. It focuses your search and shows sellers that your borrowing capacity has already been assessed by a financial institution.
In this article, find out what a mortgage pre-approval is, why it matters and what steps to follow to get one.
In brief
- Pre-approval tells you your borrowing capacity, that is, the amount a lender could grant you to buy a property.
- It helps you set a realistic budget and target homes that match your financial situation.
- A pre-approval often includes a reserved mortgage rate, generally for 30 to 120 days.
- It strengthens the credibility of your purchase offer, since sellers know your borrowing capacity has already been assessed.
- A pre-approval does not guarantee the mortgage loan: the lender must confirm your financing once you have chosen a property.
What is a mortgage pre-approval?
A mortgage pre-approval is a written confirmation from a financial institution stating the maximum amount it could lend you to buy a property in Quebec. The amount is based on an analysis of your financial situation: income, debts, credit score and down payment.
This step tells you your borrowing capacity before you start house hunting and helps you focus your search according to your budget.
Why get pre-approved before buying a home?
Getting a mortgage pre-approval before you start looking comes with several important advantages. It allows you to:
- Know your real budget: pre-approval determines the maximum amount you could borrow, which helps you target properties that match your financial capacity.
- Reserve a mortgage rate: most financial institutions allow you to lock in an interest rate for 30 to 120 days, which protects you if rates rise.
- Strengthen the credibility of your offer: a pre-approval shows the seller that your borrowing capacity has already been assessed by a lender, which makes your offer more reassuring.
- Speed up the buying process: since part of the financial analysis is done in advance, your financing can close faster once you find the right property.
How to get pre-approved for a mortgage?
Want a mortgage pre-approval before buying a home in Quebec? Here are the five main steps to follow.
1. Assess your financial situation
Before applying for a mortgage pre-approval, take a moment to review your financial situation.
This step lets you determine whether your current budget can support a real estate purchase and how a mortgage payment would fit into your monthly expenses.
Several elements should be reviewed, including:
- Your income;
- Your current debts;
- Your credit score;
- Your available down payment.
2. Choose a lender or a mortgage broker
To get a mortgage pre-approval, you generally have two options:
- Apply directly with a mortgage lender: you contact a financial institution that will analyze your file and determine the amount it could lend you.
- Go through a mortgage broker: this professional acts as an intermediary and can compare offers from several financial institutions to find financing terms suited to your situation.
Why work with a mortgage broker?
Working with a mortgage broker offers several advantages for a future buyer. This professional can:
- Compare several lenders to find a mortgage suited to your situation.
- Save you time, since one application gives you access to multiple options instead of contacting each bank separately.
- Guide you through the process and explain the different financing conditions.
- Limit the impact on your credit score by consolidating credit checks across multiple lenders.
- Offer a free service in most cases, since the broker is paid by the financial institution once the loan is finalized.
3. Gather the required documents
Before submitting a mortgage pre-approval application, you will need to provide several documents so the lender can verify your financial situation. This information is used to assess your ability to repay a mortgage loan.
Financial institutions generally ask for:
- Proof of income (pay stubs);
- Your two most recent notices of assessment;
- Your bank statements;
- Information about your current debts;
- Proof of down payment.
These documents give the lender a complete view of your financial situation before determining the amount it could grant you.
4. File analysis by the lender
Once your pre-approval application is submitted, the lender will analyze your file to determine the maximum amount it could lend you for the purchase of a property. To assess your borrowing capacity, several elements are reviewed:
- Your credit score;
- Your income and debts;
- Your debt ratio (GDS and TSD);
- Your job stability;
- Your down payment.
5. Receive your mortgage pre-approval
If your file is accepted, you will receive a mortgage pre-approval letter. This document confirms that the lender is ready to grant you a mortgage loan up to a certain amount, under certain conditions.
The pre-approval generally indicates:
- The maximum amount you can borrow;
- The reserved mortgage rate;
- The validity period of the pre-approval.
This letter lets you start house hunting with a clear budget and shows sellers that your borrowing capacity has already been confirmed.
What if your pre-approval is denied?
A refusal does not mean your purchase project is impossible. Several solutions can improve your file and increase your chances of getting financing. For example, you could:
- Pay off your debts (credit cards, lines of credit, etc.);
- Increase your down payment;
- Correct certain elements of your credit file;
- Adjust your purchase budget.
In some cases, a mortgage broker can help you find a lender that is a better match for your financial profile.
How long is a mortgage pre-approval valid?
A mortgage pre-approval is generally valid between 30 and 120 days, depending on the financial institution. During this period, the mortgage rate can be reserved, which protects you if rates rise.
If your pre-approval expires before you find a property, you can apply for a new one. You will need to update your file and redo certain checks.
Does pre-approval guarantee a mortgage?
No. A mortgage pre-approval does not automatically guarantee that you will get a mortgage loan. It simply indicates that a lender would be ready to grant you a certain amount, based on your financial situation at the time of analysis.
Before granting the final mortgage, the financial institution must:
- Confirm that your financial situation has not changed since the pre-approval;
- Analyze the property you wish to buy;
- Verify that the property meets its financing criteria.
If these conditions are met, the lender will then confirm the final approval of the mortgage loan.
FAQ — Mortgage pre-approval
Does a pre-approval impact your credit score?
Yes. A mortgage pre-approval application triggers a hard credit check by the lender, which typically lowers your credit score by a few points temporarily. The effect usually fades within a few months.
How long does it take to get a pre-approval?
A mortgage pre-approval is generally issued within 24 to 72 hours, depending on the financial institution and the completeness of your documents. Working with a mortgage broker can shorten this timeline.
Can you buy a home without a pre-approval?
Yes, you can buy a home without a mortgage pre-approval. However, this step is strongly recommended in Quebec, since it tells you your real budget, locks in a mortgage rate and reassures sellers when you submit a purchase offer.
How much can I borrow for a home?
The amount you can borrow to buy a home depends on your income, debts, credit score and down payment. Lenders also apply debt service ratios (GDS up to 39% and TDS up to 44%) to determine whether your situation can support mortgage payments.
A mortgage pre-approval gives you a more accurate estimate of the amount you could borrow.
What is the difference between pre-qualification and pre-approval?
Pre-qualification is a quick, informal estimate of your borrowing capacity based on the information you provide. Pre-approval involves a full analysis of your financial file, including a credit check, and produces a written confirmation from the lender with a reserved mortgage rate.
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