When you first sit down with your Ottawa mortgage broker to try and get an Ottawa mortgage, some of the first terms that you’ll hear are “pre-qualifying” and “pre-approval.” All to often homebuyers get confused by these terms and even mistakenly use them interchangeably. So what’s the difference?
Before you even think about finding your dream home, you may want to be pre-approved or pre-qualified for a mortgage. This is because sellers like to know that their sale will go off without a hitch, and they don’t want to take the chance that the buyer will have problems with financing, stalling the sale or making it fall through completely. You’ll most likely need to be pre-approved before any seller takes your offer seriously; and you’ll have to be pre-qualified to know what kind of homes you should be looking at in the first place.
First comes pre-qualifying. Before you set off to find the home of your dreams, you first need to know how much home you can afford. This is what the pre-qualifying process will tell you. It will show you how much you will most likely be approved for, so that you can know to look for homes within your budget. No point in looking at, or getting excited about, a home that you won’t be able to buy anyway, and this is what the pre-qualifying process is for. The process only takes a few minutes and only requires some of your most basic information. No applications need to be filled out and no credit reports need to be obtained – but no mortgage is also guaranteed to be forthcoming.
A pre-qualification on the other hand, will give you much more, and it’s usually this that sellers are looking for when you put in an offer on their home. A mortgage pre-qualification tells you, and the seller, that you have been guaranteed a specific mortgage rate; so barring any unforeseen problems with your application, you should be able to buy that home. Because pre-qualifying gives you a little more than a pre-approval, the application process is also much more involved. For this you will need a credit report, and you will need to fill out an application. While pre-approval can usually be done online, a pre-qualification usually requires visiting a mortgage broker and letting them help you with the paperwork.
Pre-qualifying for a mortgage and being pre-approved for one are two very different things. It’s essential that you take care of both before you even start looking at homes, if you want to be taken seriously by any seller.
