Pre-Approval Letter

Understand what a pre-approval letter is in Canadian real estate, what it includes, and how it helps buyers make competitive offers.

Pre-Approval Letter

May 22, 2025


What is a Pre-Approval Letter?

A pre-approval letter is a document issued by a lender that states a buyer has been conditionally approved for a mortgage up to a specified amount, based on a preliminary review of their financial profile.

Why Do Pre-Approval Letters Matter in Real Estate?

In Canadian real estate, a pre-approval letter helps buyers prove their seriousness to sellers and strengthens their offer in competitive markets. While it’s not a final loan commitment, it provides a detailed snapshot of the buyer’s borrowing power.

Pre-approval letters typically include:
  • Maximum loan amount
  • Estimated interest rate and term
  • Conditions (e.g., property appraisal or documentation)
  • Validity period (usually 60–120 days)

Having a pre-approval letter can speed up the closing process and reassure sellers that the buyer is financially qualified.

Understanding the role of a pre-approval letter helps buyers shop within their budget and act quickly on desired properties.

Example of a Pre-Approval Letter in Action

A buyer presents a pre-approval letter showing they are approved for up to $750,000, giving the seller confidence to accept their offer.

Key Takeaways

  • Confirms preliminary mortgage approval.
  • Strengthens buyer credibility.
  • Based on credit and income review.
  • Contains loan amount and terms.
  • Not a final commitment.

Related Terms

Additional Terms

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