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.
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
- Mortgage Pre-Approval
- Conditional Approval
- Mortgage Qualification
- Interest Rate
- Financing Condition
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