What does mortgage preapproval tell you?

Preapproval can help you understand a potential borrowing amount and estimated payments. Depending on the lender and product, it may also include a rate hold.

Lenders do not all use the words “prequalification” and “preapproval” in the same way. Ask whether your income, credit, debts and down-payment documents have been reviewed, or whether the estimate relies mainly on information you supplied.

What still needs to happen for final approval?

Once you have a property in mind, your mortgage professional needs information about the purchase. This can include the listing, signed purchase agreement, property taxes and applicable condo fees.

The lender considers the property as well as your financial circumstances. It may require an appraisal or other information before confirming the amount and terms it will offer.

Read your mortgage commitment carefully. An approval letter can still contain conditions and closing requirements. Ask your mortgage professional to identify what remains outstanding and what must happen before funds can be released.

Does preapproval replace a financing condition?

No. Do not treat preapproval as a reason, by itself, to leave a financing condition out of your offer.

A financing condition can provide time to confirm financing under the terms written into your agreement. Its wording, deadline and notice requirements matter.

Before deciding how to structure your offer, discuss your financing status with your lender or mortgage broker, your real estate broker and, where needed, your lawyer.

If a financing condition is included, do not let the deadline pass without understanding what action is required. Ask for advice before signing a waiver or notice relating to that condition.

What should you prepare before making an offer?

Ask your mortgage professional for a document checklist early. Depending on your circumstances, it may include:

• Identification and proof of employment or other income.
• Recent financial statements showing your savings and down-payment funds.
• Details of loans, credit balances and other financial commitments.
• Documentation for gifted funds, if someone is helping you.
• Information about the property you want to purchase.

If your income, employment, debts or down-payment arrangements change during your search, tell your mortgage professional promptly. Ask how the change affects your financing before committing to a purchase.

Your borrowing limit and your comfortable budget may differ

Before we narrow your search, I want you to think about the monthly payment you feel comfortable carrying, alongside the amount a lender may offer.

Compare the full costs of the homes you are considering in Toronto and Markham. Include property taxes, utilities, insurance, applicable condo fees and room for maintenance.

Also keep closing and moving expenses in your plan. A home that fits within a borrowing estimate should still fit the way you want to live.

Five questions to ask before your first offer

1. Have you reviewed my supporting documents, or is this still an initial estimate?
2. What do you need to review for this particular property?
3. Are there outstanding conditions, an appraisal or other checks?
4. What timing do you need, and how should that inform the financing deadline in my offer?
5. What changes should I report to you before closing?

Ask for a clear explanation of your approval status. Knowing what remains to be done helps you make decisions about your offer with fewer assumptions.

What happens after your offer is accepted?

Send the purchase documents to your mortgage professional promptly and work through any requests. Keep your real estate broker informed about progress and any financing-condition deadline.

As closing approaches, continue coordinating with your lender and lawyer on the remaining requirements, signing appointments and funds you must provide.

Your real estate broker helps you navigate the purchase. Your lender makes the lending decision, and your lawyer handles the legal closing. Keep those roles connected as the transaction moves forward.