Recently I had a client who had been told by her bank she was approved to purchase up to $700,000.
She went out shopping, found a home she loved, and got an accepted offer.
When she contacted the bank to finalize everything, she was told the next available appointment was a week away. Unfortunately, that would be after her subject removal date.
She was referred to me.
Within 24 hours we had a full application completed and all of the required documents submitted. But once the numbers were properly reviewed with the same lender, the actual maximum purchase price came in at just under $300,000.
That’s a very big difference.
So what happened?
The original “approval” had been based on no due diligence. No credit pulled. No documents collected. No property expenses considered.
In other words, it wasn’t a true pre approval. It was more of a quick estimate. And unfortunately, situations like this happen more often than people realize.
A proper pre approval should involve reviewing your financial documents, running the numbers correctly, and making realistic assumptions about the property you intend to buy. When that work is done upfront, you can confidently make an offer knowing your financing is solid.
If you’re preparing to buy a home, here are some important questions to ask your lender to make sure your pre approval is actually meaningful.
13 questions to ask before relying on a pre-approval
- Was my credit actually pulled? A real pre approval starts with reviewing your credit bureau.
- What is my credit score? Your credit rating impacts lender options, approval conditions and sometimes the rate you qualify for.
- Has my income been verified? Your lender should have collected your most recent pay stub.
- If my income varies, were the last two years reviewed? Bonus, commission or overtime income usually requires a two-year history.
- If I’m self-employed, were my tax returns reviewed? Most lenders require the last two years of tax returns or financial statements.
- Was my down payment reviewed? Your lender should confirm where the funds are coming from and whether they are acceptable to the lender.
- Are my funds accessible? Investments, RRSP withdrawals or gifted funds may require documentation to confirm they can be used.
- Were my existing debts reviewed? Loans, credit cards and other obligations must be included when calculating what you qualify for.
- Were property expenses included? Estimated property taxes, strata fees and heating costs should be part of the calculation.
- Did they ask about the type of property? Some property types can affect financing, including acreage, leasehold land or certain rental properties.
- What rate and mortgage structure was used? Ask what interest rate was used for qualification, whether the numbers were run on a fixed or variable rate, and what term length was assumed.
- What stress test rate and amortization were used? Your qualification depends on the stress test rate and amortization used in the calculation.
- Has a lender actually reviewed my information or is this simply an estimate? A proper pre approval should include credit review, documentation, realistic property expenses and clear mortgage parameters.
- Bonus: Did they provide me confirmation of everything in writing?
Anything less can lead to surprises after you already have an accepted offer.
If you’re thinking about buying and want to make sure your financing is properly set up from the beginning, reach out anytime. Getting the details right early can make the entire purchase process much smoother.