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How Long Does a Mortgage Pre-Approval Last in Canada? Financing Timelines and More Explained

But what is a mortgage pre-approval? Why is it so important? How do you go about getting one? And what are the potential obstacles to getting pre-approved? Let's unpack each of these questions in our comprehensive guide to mortgage pre-approvals and their role in your search for the perfect Waterloo Region home.


Are you considering buying a home in the thriving Waterloo Region? If so, one of the most important steps to consider early in your home buying journey is obtaining a mortgage pre-approval.


But what is a mortgage pre-approval? Why is it so important? How do you go about getting one? And what are the potential obstacles to getting pre-approved? Let's unpack each of these questions in our comprehensive guide to mortgage pre-approvals anf their role in your search for the perfect Waterloo Region home.


What is a Mortgage Pre-Approval?


A mortgage pre-approval is a process through which a lender examines your financial situation and determines how much they would be willing to lend you for a home purchase. This is based on various factors like your income, credit score, and existing debts. Once this process is complete, the lender provides you with a pre-approval letter indicating the maximum mortgage amount they are willing to offer, the interest rate, and the terms the loan will be offered with.


In simple terms, a mortgage pre-approval is essentially a lender's promise to offer you a certain amount of financing for your home, provided your financial situation remains unchanged.


Why is a Mortgage Pre-Approval So Important?


A mortgage pre-approval serves several vital purposes in the home buying process:


  • Budgeting and House Hunting: The pre-approval letter provides clarity on the maximum amount you can borrow, helping you establish a realistic budget for your house hunting. It reduces the chances of falling in love with a home only to realize later that it's out of your financial reach.

  • Negotiating Power: Being pre-approved signals to sellers that you are a serious and prepared buyer, which can give you a competitive edge, especially in a hot market like the Waterloo Region.

  • Interest Rate Lock: Pre-approvals often come with an interest rate hold for a certain period. This means even if rates go up during your house hunting, you are guaranteed the lower rate quoted in your pre-approval.

  • Speeds Up the Mortgage Process: Once you make an offer on a house, the mortgage process can move far more quickly because much of the financial vetting is already complete.


What You Need to Do to Get Pre-Approved


Obtaining a mortgage pre-approval involves gathering several important documents and providing them to potential lenders. These usually include:


  • Proof of income (such as pay stubs, T4 slips, or tax returns)

  • Information about your assets and liabilities

  • Consent for a credit check


Different lenders have different criteria, so it's essential to ask each lender what they require.


Common Bars to Mortgage Pre-Approval and Overcoming Them


Some of the common hurdles to getting a mortgage pre-approval include:


Poor Credit


A low credit score can negatively impact your ability to get pre-approved. To overcome this, you may need to work on improving your credit score by paying your bills on time, reducing your debt, and regularly checking your credit report for errors.


It's worth noting here that even if your credit score qualifies you for a mortgage the higher it is the lower your interest rate may be. It's for this reason that keeping a close on your credit health, and actively working on it as needed, is so important. For far more information on the best ways to do that check out our extensive guide to credit health for home buying here.


Insufficient Income


Lenders want to ensure you can afford the mortgage payments. If your income is too low, consider saving for a larger down payment or look for a cheaper property.


High Debt Ratios


If your existing debt levels are high relative to your income, this can be a barrier. To reduce your debt ratios, try to pay down existing debts before applying for pre-approval and minimize the number of new debts you take on for several months before you apply for a mortgage.


Navigating the Scenario: When Your Dream Home Eludes Your Pre-Approval Window


Mortgage pre-approvals offer many benefits, but they also operate within a time limit. Typically, this ranges from 90 to 120 days. But what happens if you can't find the perfect home within this time frame? Don't panic, you have several options to consider:


  • 1. Request an Extension: Depending on your lender, you may be able to request an extension of your mortgage pre-approval. Not all lenders offer this convenience, but it's worth asking. Keep in mind, however, they may want to re-assess your financial situation and the interest rate may be adjusted if market rates have increased.

  • 2. Reapply for Pre-Approval: If an extension isn't available, or market conditions have significantly changed, you can reapply for another pre-approval. This will likely involve submitting updated financial information and consenting to another credit check. This is a practical option, but remember, numerous hard inquiries on your credit can temporarily lower your credit score.

  • 3. Continue Your Home Search Without a Pre-Approval: You could continue your search without an active pre-approval, but this comes with risks. You may lose the competitive advantage of being a pre-approved buyer, and if market rates increase, you could be looking at higher mortgage payments.

  • 4. Reevaluate Your Home Buying Strategy: If you've been unable to find a suitable property within your pre-approval period, it may be a good time to reassess your home buying strategy. Perhaps you need to adjust your expectations, expand your search area, or consider a different type of property.


Navigating the timing of mortgage pre-approvals can be tricky, and every situation is unique. That's why working with experienced professionals, like Team Pinto, can make a huge difference.


We understand the market in the Waterloo Region and can guide you through every step of the home buying process. We're here to ensure your journey to homeownership is as smooth and stress-free as possible, no matter how long it takes to find your dream home. Contact us today and let's chat about how we can help you.

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