Pre-approval is a rehearsal, not a promise
A pre-approval is a lender looking at your real documents and saying how much it would lend you under today's rules, usually with a rate held for a set number of days while you look. It tells you your ceiling before you fall for a house. It is the number to shop with.
It is not an approval. The lender has not seen the property yet, and the property has to pass too: the appraisal, the strata's documents, the age and condition of the building. A number from a website form is not a pre-approval either; nobody has read your pay stubs.
We collect documents first, then take the application to a lender, so the pre-approval you carry into an offer is one a lender has actually read. Keep a financing condition in your offer where the market lets you, a clause that lets you walk away if the mortgage does not come through; those are the days the lender needs to look at the property.
The four things a lender weighs
Every purchase application answers the same four questions; the documents just prove the answers.
Income
Is it steady, and can you prove it? Salaried: two recent pay stubs, a letter of employment, and two years of T4s and notices of assessment, the CRA's summary of each year's return, showing nothing owing. Overtime, bonus and commission usually need a two-year history before they count. Income from your own business has its own page.
Self-employed income →Down payment
Where did it come from, and can you show it? Lenders want ninety days of statements and the source of any large deposit. A gift from immediate family needs a signed letter saying it is not a loan. Savings in an FHSA or an RRSP count, with their statements.
Programs for first-time buyers →Credit
Not a single score so much as a pattern: paid on time, balances well under the limits, nothing in collections. One report is pulled with your written consent and travels with the application. If something on it needs fixing, we say so before any lender sees it.
When the bank says no →The property
The lender is lending against it, so it has to pass: an appraisal if the lender asks, the strata's documents and finances for a condo or townhouse, and the building's age and condition. A home with a rental suite, or a home you will rent out, is read differently.
Rental and investment property →Down payment and closing costs in BC
The minimum down payment on a home you will live in starts at five percent of the first part of the price and rises above that; the exact figure depends on the price, and the lender confirms it. With less than twenty percent down the mortgage is insured against default, and the premium is added to the mortgage. At twenty percent or more there is no premium.
On completion day you also pay BC's property transfer tax, calculated on the price in bands. First-time buyers, and buyers of newly built homes, can be exempt in full or in part when the price is under the current limit and they live in the home. Your lawyer or notary applies for it at completion.
Budget for the rest too, on top of the down payment:
- Legal fees, and the lawyer's or notary's out-of-pocket costs, called disbursements
- Title insurance, which most lenders require
- An appraisal, if the lender asks for one
- A home inspection, if you choose to have one
- Adjustments: your share of property tax and strata fees the seller has already paid
- Moving, and the first month of utilities and home insurance
Lenders want to see closing costs in hand as well as the down payment; a common rule of thumb is one and a half percent of the price.
How we compare lenders for a purchase
One application, one credit report, and the lender whose rules fit the way you earn and the property you are buying. Banks, credit unions and alternative lenders each have their own: some want a longer job history, some read a rental suite generously, some will not take a building over a certain age.
Beside the rate we compare the term, fixed or variable, how much you can prepay each year without a penalty, how the penalty is calculated if you break the term, whether the mortgage can move to your next home, and whether the lender can meet your completion date. If your bank has already made an offer, it goes in the same table, and you choose.
You see what each option would cost per month before you decide. Payment calculator →
From offer to keys
How long it takes depends on the lender and the time of year; we tell you the realistic timing upfront, and the dates in your contract set the pace.
- 1
A short call
What you are buying, where, and when. We say what is realistic and who on the team will look after you.
- 2
Documents, then pre-approval
We collect the documents first, then take the application to a lender. You get a ceiling you can shop with, and usually a rate held for a set period.
- 3
Offer accepted
We send the property to the lender the same day: the contract, the listing, and the strata documents if there are any. The lender orders an appraisal if it wants one.
- 4
Approval and conditions
The lender's approval comes with conditions: a document here, a letter there. We clear them with you before the subject-removal date, the day in the contract by which your conditions must be met or the deal ends, and tell you when it is safe to remove your financing condition.
- 5
The lawyer or notary
The lender sends its instructions to your lawyer or notary. You sign about a week before completion and deliver the balance of the down payment and the closing costs to them.
- 6
Completion, then possession
On completion day the lender advances the money, the lawyer pays the seller, and title transfers to you. Possession is usually a day or two later: keys.
How long does a pre-approval take?
It depends on the lender and the time of year; we tell you the realistic timing upfront. Gathering the documents is the slow part, which is why we start there.
Does a pre-approval affect my credit?
One credit report is pulled, with your written consent, and it travels with the application. A single mortgage enquiry has a small effect; several lenders each pulling their own is what we avoid.
Should I make an offer without a financing condition?
Only with a pre-approval a lender has actually read, and knowing that the property still has to pass. We tell you what the lender needs to see and how many days it takes, so you can decide with the facts in front of you.
Can part of my down payment be a gift?
Yes, from immediate family, with a signed gift letter stating it does not have to be repaid. The lender may ask to see the money arrive in your account before completion.
What if the appraisal comes in below the price?
The lender lends against the lower of the price and the appraised value, so the gap comes from you. Before subjects are removed there is time to negotiate, add funds or walk away; after, there is not, which is why the financing condition matters.
Bring your bank's pre-approval if you have one; it goes beside the others. Book a 20-minute call →