When A Pre-Approval Isn’t Quite What You Thought…

When A Pre-Approval Isn’t Quite What You Thought…

Pre-approvals: It’s a must when house-hunting, but do you know that a pre-approval is not a guarantee?

There are many common misconceptions about pre-approvals, and today I want to share some of those with you so that hopefully you can avoid some of these pitfalls.

I want to start off by saying that, regardless of the misconceptions, it is still ALWAYS a good idea to get a pre-approval. Why? Because a pre-approval can put you ahead of other prospective buyers in the market. Many realtors will not even start showing you place until you are pre approved.  A pre approval allows up to clear up any credit issues, gives you a very good indication of what price range you should be shopping in, and gives you an estimate cost. It also holds a rate for you so you can shop with peace of mind for the duration of the pre approval. There’s simply nothing worse than falling in love with your dream home to be let down when you learn you don’t qualify to buy it.

Misconception #1:The pre-approval is a solid approval

WRONG! The pre-approval is merely a rate hold with most lenders. Your broker will review your documents and communicate those figures to the lender but the lender is not reviewing your documents.  The lender and insurer (if applicable) have the final say as they have to approve the property, your credit, income, down payment, and even the mortgage amount for that particular area/ property type.

Misconception #2: My credit score as of the pre-approval date will be what it is when I go to apply for the ‘real mortgage’.

WRONG! Your credit always fluctuates as a result of bill payments, credit utilization, credit checks, and late, or missed payments. If your credit score lowers between the time of the pre-approval and when you have an accepted offer, you would be in trouble.

Misconception #3: My rate will be exactly as it is on my pre-approval.

The rate hold on the pre-approval is a safety blanket. For most clients the rate will actually be less on their live deal as a lot of lenders don’t offer a pre approval and if they do, they do not offer their promo rates. Remember, a pre approval is a conditional offer from the lender.  If the lender does not want to lend on the property, we would have to explore different lenders. At that time you will not have your pre approval rate, as lenders have different products and different rates. .

Misconception #4: I’m pre-approved, so now I can start financing other things.

NOOOOOOO! This is the biggest mistake I see all the time. People get comfortable knowing the have been pre-approved, so they buy a new car, or finance something not necessary at the time. This will almost always negate the entire pre-approval and you will be starting all over again as your credit utilization will now be out of whack.

Misconception #5: Your year-old pre-approval will still be valid when you’re ready to go home shopping.

I wish this was true – but sadly, another false item here. Your pre-approval is only valid for up to 120 days. With rules changing all the time, it’s very important to check in with your broker and see how the new rules have impacted your mortgage qualification.

This list is certainly not exhaustive of pre-approval myths, but it’s a good sampling of the things that I hear all day about people who think they’ve got it all squared away with their pre-approval. Although some call it a glorified rate-hold, for the majority of people it’s still a necessity. Be careful and make sure you are keeping your mortgage broker up to date about your plans as you progress so they can ensure you’re positioned in the best possible way to get the financing you need.

Do you have a pre-approval story to share? Comment below!

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About Atrina Kouroshnia

Atrina Kouroshnia is an independent, licensed, mortgage broker in the province of British Columbia. She has a degree in Human Relations & Commerce, and past work experiences in HR & Real Estate Development. She comes to the table with great customer service and problem-solving skills. Her approach to finding the best mortgage solution involves both short and long-term planning, making sure her clients are in a suitable mortgage that is flexible to their needs.