What is a Pre-Approval
Michael Hallett • January 24, 2019
Answer: When the borrower provides every single document (see list below) upfront to be reviewed to prove income/employment, creditworthiness and down payment amount.
Question: What is a PRE-APPROVAL?
The term PRE-APPROVAL is thrown-about and used so loosely that nobody really knows what it means. It is quite common for borrowers to walk away from a lender appointment thinking they are guaranteed financing once they find a home to purchase, it’s often not the case.
I really wish we could delete the word from the English language. Most of the time we only hear what we want to hear. Lender speaking to client 1, “…you’re pre-approved…,” client 1 speaking to spouse, “…we’re approved…” and me/broker thinking, “…I sure hope all the documents were requested and reviewed…”
Since the word is out there being used freely let’s look at what it really means.
PRE
= is prior to; before; preparatory; or in advance. APPROVED
= officially agreed or accepted as satisfactory. APPROVAL
= the belief that someone or something is good or acceptable.
Based on the definition (for the purpose of using this term in the mortgage industry), a PRE-APPROVAL is the act of providing a client(s) with guaranteed financing before completing all fours parts of a mortgage application. The fourth and finally part of the mortgage application is knowing or finding the SUBJECT PROPERTY. This is what I consider to be the x-factor. The sole discretion of approving the subject property is in the hands of the lender and potentially the insurer (if mortgage insurance is required). Review of the property doesn’t not happen until an accepted often is presented to the lender.
Is the property marketable or not? This can only be answered through proper due diligence while utilizing various tools at their disposal.
Every document we provide serves a specific purpose to complete the puzzle that we refer to as risk management. The lender needs to assess the probability that the borrower can meet the terms of the mortgage contract.
My process is quite simple, ask for 100% of the documents upfront. Upon full review it will be obvious if the file is approvable or not. Here is a list of documents that will be required if the broker/lender is conducting a proper pre-approval:
For employees:
- Letter of employment dated within the last 30 days
- Most current paystub
- 2016 and 2017 NOA (Notice of Assessment)
- 2016 and 2017 T4s
For Business-For-Self:
- T1 Generals and Stmt of Business Activities
- 2016 and 2017 NOA (Notice of Assessment)
- Business financials (if incorporated)
- Articles of Incorporation
If there are other properties in the portfolio:
- Mortgage stmt
- Property tax notice and confirmation the taxes are paid
- Rental agreement
- Strata documents
Purchase:
- Purchase contract & all addendums
- Subject removal
- MLS
- PDS
- Strata docs – AGM, monthly mins, Engineers & Depreciation Report
- Confirmation of your down payment with a 90-day history
Other:
- BC Driver’s License or passport
If you have not been asked to supply these supporting documents upfront, then that broker/lender is setting you up for failure.
If you do not provide the requested documents, then you are setting yourself up for failure.
IMPORTANT PUBLIC SERVICE ANNOUNCEMENT…there is no such thing as a 60 Second Pre-Approval. Our society is falling victim to instant gratification and marketing gurus are aware of this fact. Some of Canada’s ‘big banks’ have tapped into those desires. There is advertising in the marketplace claiming a pre-approval can be completed in 60 seconds.
My online application takes a minimum of five minutes to fill out. Pulling one’s credit takes another minute, heck it can take the client a minimum of one hour (likely more) to compile and send all the supporting documents. Don’t fall for it, it is a false statement.
If none of the above steps were taken, then you have what we call a rate hold. This simply secures an interest rate up to 120 days.
If you have any questions about this topic or anything else, please do not hesitate to call, text (604-616-2266) or email (michael@hallettmortgage.com) me at anytime.
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One of the most common questions, “how long does it take to get pre-qualified?” My response, “how fast can you provide the information I need.”
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My sons intro to operating a side-by-side on his own. Watch to the end.
The Lookout over looking Tulameen BC. Took some 4x4ing to get there, but we did it.
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This would have been a fun stunt once upon a time!
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Aidan is captaining the watercraft, mom in just the passenger. Kalamaka Lake.
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Saratoga Beach fire.
Canadian tuxedo.
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When you apply for a mortgage, your employment history and status carry a lot of weight. Even if you feel secure in your job, lenders need proof that your income is reliable and will continue. To them, your employment status is one of the strongest indicators of whether you can make your mortgage payments long term. Here’s how lenders typically view different employment situations: Permanent Employment This is the gold standard. Once you’ve passed any probationary period and hold permanent status, lenders see you as a lower risk. It shows that your employer is committed to you, and your income is steady. Probationary Periods If you’re still on probation—usually 3 to 6 months, though sometimes longer—lenders may hesitate. That’s because your employer can end your contract without cause during this period. Once probation is over, you’re considered more secure. That said, context matters. If you’ve worked with the same company for years as a contractor and just transitioned into full-time employment, lenders may accept a letter from your employer confirming that probation is waived. Documentation is key here. Parental Leave Being on or about to take parental leave doesn’t mean you can’t qualify for a mortgage. As long as you have a letter from your employer guaranteeing your position and return-to-work date, lenders can use your regular salary—not your leave income—when assessing your application. Term Contracts This is one of the trickiest categories. Even highly skilled professionals with strong incomes can face challenges here. A term contract has a start and end date, which makes lenders question the stability of your future income. To use term-contract income, lenders generally want to see at least two years of history, or proof that your contract has already been renewed. The more evidence you can show of consistent employment, the stronger your case will be. The Bottom Line If you’re planning to apply for a mortgage, it’s important to understand how your employment status could affect your approval. Whether you’re starting a new job, coming back from leave, or working under contract, lenders want documentation that proves your income is reliable. 📞 If you’ve recently changed jobs or are planning a career shift, let’s connect. I can help you prepare your file so you qualify with confidence and avoid surprises in the approval process.
When you’re buying a home, two terms often cause confusion: deposit and down payment . While they’re related, they serve very different purposes in the homebuying process. Here’s what you need to know. What Is a Deposit? A deposit is the money you provide when you make an offer on a property. Think of it as a show of good faith that proves you’re serious about purchasing. How it works : Typically, you provide a certified cheque or bank draft that your real estate brokerage holds in trust. If your offer is accepted, the deposit remains in trust until the deal moves forward. If negotiations fall through, the deposit is refunded. Connection to your down payment : Once the sale is finalized, your deposit becomes part of your total down payment. Why it matters : The amount is negotiable, but a larger deposit can make your offer more attractive in a competitive market. Keep in mind, however, that if you back out after conditions are removed, you risk losing your deposit. What Is a Down Payment? Your down payment is the amount you contribute toward the purchase price of your home when securing a mortgage. Minimum requirement : In Canada, the minimum down payment is 5% of the home’s purchase price. Anything less than 20% requires mortgage default insurance. Sources : Down payments can come from your savings, the sale of another property, RRSP withdrawals (through the Home Buyers’ Plan), a gift from family, or even borrowed funds. Example: How They Work Together Imagine you’re buying a $400,000 home with a 10% down payment ($40,000). When you make your offer, you provide a $10,000 deposit . Once conditions are met, that deposit is transferred to your lawyer’s trust account. At closing, you add the remaining $30,000 to complete your full down payment. The lender provides the rest—$360,000—through your mortgage. The Bottom Line Your deposit shows commitment and secures your offer, while your down payment is what makes the mortgage possible. Together, they work hand in hand to get you into your new home. 📞 If you’d like clarity on deposits, down payments, or any other part of the mortgage process, let’s connect. I’d be happy to walk you through it step by step.
