Pre-Approval
Learn what mortgage pre-approval means in Canadian real estate, how it works, and why it’s crucial for confident and informed home buying.
May 22, 2025
What is a Pre-Approval?
Pre-approval is a lender’s preliminary review of a buyer’s finances to determine how much they may qualify to borrow for a mortgage.
Why Pre-Approval Matters in Real Estate
In Canadian real estate, getting pre-approved helps buyers understand their purchasing power and signals financial readiness to sellers. It often includes a soft credit check, income verification, and debt analysis.
Key details provided in pre-approval include:
- Maximum loan amount
- Interest rate (often rate-locked for 60–120 days)
- Estimated monthly payments
- Mortgage term and amortization
Pre-approval is not the same as final approval. Buyers must still satisfy conditions once they make an offer on a property. It helps avoid surprises and narrows the home search to realistic price points.
Understanding pre-approval ensures smoother home shopping and stronger offers in competitive markets.
Example of Pre-Approval in Action
A buyer receives pre-approval for a $650,000 mortgage, with a 5-year fixed rate locked in for 90 days while they search for a home.
Key Takeaways
- Helps buyers define a realistic budget.
- Indicates borrowing capacity and rate.
- Valid for 60–120 days.
- Not a guarantee of final approval.
- Strengthens purchase offers.
Related Terms
- Mortgage Qualification
- Pre-Approval Letter
- Financing Condition
- Debt Service Ratios
- Interest Rate
205 Queen Street, Brampton/Hazelview
CREA
Liam Gill is a lawyer and tech entrepreneur who consults with Torontonians looking to convert under-densified properties. (More Neighbours Toronto)
401-415 King Street West. (JLL)
Eric Lombardi at an event for Build Toronto, which is the first municipal project of Build Canada. Lombardi became chair of Build Toronto in September 2025.