You get an email saying you’re pre-approved for a $500,000 mortgage. That evening, you start looking at listings with a little more confidence.
Then you find a home you like. It fits your budget. Can you make an offer knowing the mortgage is sorted?
Not yet. A pre-approval helps establish what you may be able to borrow, subject to conditions. The lender still needs to assess the home you choose and complete any outstanding checks.
That makes it useful, but it helps to know exactly what has been approved, and what comes next. FCAC
The first four steps take you through pre-approval. Then comes your own budget and, once you find a home, approval for that specific purchase. Some checks overlap or happen later, depending on the lender.
1. Start with a conversation
You can contact a lender directly or speak with a mortgage broker. You do not have to use the bank where you keep your everyday account.
The lender supplies the mortgage money. A mortgage broker helps arrange financing through the lenders they work with; that does not necessarily include every lender in Canada. A bank’s mortgage specialist helps you apply for that bank’s mortgages.
Your real estate agent helps you find a home and make an offer. Your lawyer or notary, as applicable, handles the legal work involved in completing the purchase. These are different jobs. CMHC homebuying guide
You can start with something as simple as:
“I’m preparing to buy my first home. I’d like to understand what I could borrow, what it would cost each month and what you need for a pre-approval. Can you explain your process and any fees?”
Explain when you hope to buy. An early conversation gives you time to address problems, but any rate hold has an expiry date. Ask when a formal application makes sense for your timeline.
Before signing anything, ask who pays the broker and whether you will owe any fees. Brokers are usually paid a commission by the lender, though some arrangements involve additional borrower fees. Read any service agreement for fees, exclusivity and what happens if your plans change. Request the explanation in writing. Ontario regulator FSRA’s consumer guide explains these relationships and the disclosures required in Ontario; requirements vary by province.
2. Put your documents together
The lender needs evidence of the income, savings and debts you describe. Ask for its document checklist. Common requests include:
- Identification to confirm who is applying.
- Pay stubs and an employment letter to support your current income.
- Tax documents to help verify income, particularly if it varies or you are self-employed.
- Bank or investment statements to show your down-payment funds and where they came from.
- Debt statements to show existing loans and payments.
The exact documents depend on your situation.
If family is helping, explain whether the money is a gift or a loan. A loan comes with a repayment obligation. A gift may require a letter confirming that repayment is not expected. CMHC application checklist
Send your documents through the provider’s secure process. Ask what is missing and when to expect an update. That is more useful than wondering whether silence means everything is fine.
Buying with someone else? Say so at the start. The lender needs to assess the people applying together. Joint borrowers are responsible for the unpaid loan balance; a private arrangement to split payments in half does not limit each person’s responsibility to their half. FCAC on joint borrowers
3. Find out what has actually been checked
The lender considers your income, debts, credit history and expected housing expenses. Ask when it will check your credit and whether that check could affect your score.
The answer depends on the process. RBC, for example, says its online pre-approval uses a soft credit check that does not affect your score, with a credit report pulled later during the full mortgage application. That is a provider-specific process, not a promise about every application. RBC
For a new bank mortgage, you generally also need to pass a stress test. This assesses whether you could manage payments at a higher interest rate. The qualifying rate is used to assess eligibility; it is not automatically the rate you will pay. OSFI
An online result may arrive quickly. Reviewing supporting documents or a complicated income situation can take longer. An instant answer does not tell you how much verification has happened.
Ask: “Have you reviewed my documents, and what still needs to be verified?”
If the amount is lower than expected, ask what is limiting it. Knowing whether the issue is an existing debt, the income the lender can accept or something else gives you a specific question to work through.
4. Read the amount and the rate hold separately
Get the result in writing. Confirm the borrowing amount, the remaining conditions and whether an interest rate is held. Providers use “pre-qualified” and “pre-approved” differently, so the label alone cannot tell you how far your application has progressed. FCAC
Interest is the cost of borrowing. The rate is quoted annually; receiving a pre-approval does not start your mortgage payments.
A fixed interest rate stays the same for the agreed mortgage term. A variable rate can change. The term is the period covered by the current agreement, rather than the full time it takes to repay the mortgage.
A rate hold preserves a specified offer for a limited time, subject to its conditions. TD, for example, currently advertises a conditional 120-day hold and says borrowers can request an adjustment if the applicable rate falls. Do not assume every lender automatically applies a lower rate. TD
Ask these questions before relying on a hold:
- Which mortgage product does it cover?
- What exactly is protected, especially if the rate is variable?
- Does the purchase need to close before it expires?
- If rates fall, do I need to request a change?
- What happens if I have not bought a home by the expiry date?
A held rate and an approved property are separate things.
5. Decide what you want to spend
The lender’s maximum is not a spending target. A payment can fit the lender’s calculations and still leave too little for childcare, travel or the savings you want to keep building.
First, check whether the number you received is the mortgage amount or the home’s purchase price.
In our example, a $600,000 home with a $100,000 down payment leaves $500,000 to borrow before any mortgage insurance premium. You would still need separate money for closing costs, and the lender would need to approve that particular purchase.
That down payment is less than 20%, so mortgage default insurance would typically be required. If its premium is added to the loan, you would need to borrow more than $500,000. Ask whether your pre-approval amount includes that premium before setting your price range. FCAC on down payments
Ask for the estimated mortgage payment, then add property taxes, home insurance, utilities, maintenance and any condo fees. Look at what would remain each month. Would you feel comfortable living on it, including in a month when something needs repairing?
There is also a timing question: when will you need your cash?
The deposit is money provided under the purchase agreement, potentially well before closing. The agreement sets the amount and deadline. The down payment is your contribution toward the purchase price. When the purchase closes, the deposit is credited toward the money you owe. Closing costs are additional expenses, such as legal fees and applicable taxes or adjustments.
If your total down payment is $100,000 and you have already paid a $20,000 deposit, you generally have $80,000 of down-payment money left to provide, plus closing costs. Your lawyer or notary provides the exact accounting. CMHC homebuying guide
Before making an offer, check how quickly you can access the deposit. Having enough saved and being able to provide it by the deadline are two different questions.
6. Get the home approved too
The property is security for the loan. The lender needs to decide whether it will finance this particular home, even if the price fits your pre-approval.
Before making an offer, discuss a financing condition with your real estate professional and lawyer or notary. It sets out financing requirements and a deadline in the purchase agreement. Its protection depends on the wording and the steps you follow. Pre-approval alone is not a reason to assume a condition-free offer is safe. British Columbia regulator BCFSA explains this distinction.
Once your offer is accepted, promptly send the agreement and requested property details to your lender or broker. The lender may require an appraisal to assess value. If that valuation does not support the financing you need, the mortgage arrangement may have to change.
An appraisal is also different from a home inspection. An inspection helps you investigate the home’s condition and potential repair issues. A lender’s willingness to lend does not tell you whether the roof needs replacing. CMHC homebuying guide
Before your financing deadline, ask your lender or broker to confirm the result and anything still outstanding. Discuss the required contract steps with your real estate professional and lawyer or notary.
7. Complete the remaining requirements and close
An approval with outstanding conditions still has work attached to it. Those requirements and the legal closing steps must be completed before the purchase can be finalized.
Ask for a written list of outstanding requirements and their deadlines. These may include updated income records, proof of down-payment funds, property information or mortgage-insurer approval where required.
If insurance comes up, ask which kind. Mortgage default insurance protects the lender if you fail to repay. It is different from optional mortgage life or disability insurance. Ask whether the insurance being discussed is required and what it costs.
Tell the lender promptly about changes to your job, income, debts or down payment. Taking on a car loan while you are house hunting can change the financial picture the lender assessed.
For closing, follow your lawyer’s or notary’s instructions for signing documents and providing the remaining funds. Mortgage approval and the release of money are separate stages. The lender normally sends the mortgage funds to your lawyer or notary, who handles the payment and ownership-transfer steps. CMHC homebuying guide
Your lawyer or notary confirms when the purchase is complete.
Keep these questions for your first conversation
- Who is the actual lender, and which lenders do you work with?
- What will I pay you, if anything, and am I agreeing to any other obligations?
- Which documents and credit information will you check now?
- Is the amount you give me a mortgage amount or a purchase budget?
- Is an interest rate held, and under what conditions?
- What could still change the answer, and when should I expect an update?
You do not need to know every mortgage term before starting. You need someone who will explain what is happening with your application.
Whenever you hear “approved,” ask: “Approved for what, and what still needs to happen?”
Methodology and Assumptions
This guide describes the general Canadian mortgage pre-approval and purchase process. Lender requirements and provincial purchase paperwork determine the details. FSRA guidance cited here concerns Ontario; BCFSA guidance concerns British Columbia. RBC and TD are examples of specific provider processes, not rules applying to all lenders.
The $500,000 mortgage, $100,000 down payment and $20,000 deposit are illustrative figures. They are not a lending quote or an assessment of anyone’s eligibility. The example keeps closing costs and any mortgage default insurance premium separate from the $500,000 base loan.