What’s The Difference Between Pre-qualified and Pre-approved?

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Pre-approval and pre-qualification may be similar processes, but it is important to understand that they are not one and the same. While both procedures involve an analysis of your financial information to determine whether you qualify for a mortgage loan, pre-qualification is usually a quicker and more surface-level process, whereas pre-approval is a more detailed process and requires some degree of underwriting and review by an actual lender. A proper pre-approval will provide you with a formal document from a lender.

In this guide, we cover how to get pre-qualified for a mortgage, how to get pre-approved for a mortgage, and how your broker can help.

What It Means to Be Pre-qualified

Pre-qualification is often the first step in the mortgage application process . Through a mortgage broker, you as the borrower can submit financial information to your lender for assessment. This may contain, among other things, your income, bank account details, and expected loan and payment amounts. Your mortgage broker will then assess this information to determine your likelihood of making on-time loan payments in order to understand which lender you might qualify with. Your broker will be able to provide you with an estimated interest rate and other information about what your options might be.

Pre-qualification can provide you with an estimate of how much you are eligible to borrow, as well as an understanding of the many mortgage alternatives may be available to you. It ss typically a short and simple process that can be completed online or over the phone with your broker. Here at Clover Mortgage, our pre-qualification methods often times do not demand tax returns or other extensive financial information that are often required for a formal pre-approval.

There is no cost associated with a pre-qualification, so you can compare the offers of several lenders. Once you send your broker information on your income, assets, and debt history (no credit check needed at this stage), they can forward that data to a number of different lenders to help you shop around for the best fit.

At this stage, your broker can work with you to determine what your best options for a mortgage might be, and which lender might be the best fit for you. This can help you narrow down your property searches, and prepare for the mortgage pre-approval process.

Once you have been pre-qualified, your mortgage broker can provide you with a pre-qualification letter prior to committing to a lender that outlines the results of your analysis, and the next steps required to move forward with the mortgage approval process. It is important to note that being prequalified does not guarantee that you will be approved for the mortgage, however it is a good way to estimate the price range of homes you should be considering for your purchase.

How Mortgage Pre-Approvals Work

Once you are pre-qualified, the next step is often to get pre-approved. This will involve a much more in-depth analysis of your financial information, and will thus require a much more formal process. Despite this, Clover Mortgage is able to offer quick and easy pre-approvals that can be completed in just a few minutes. Check out our pre-approval page to learn more.

Like a pre-qualification, a pre-approval will require proof of income, assets, debt, and employment history. Unlike a pre-qualification however, a pre-approval will require a hard inquiry into your credit background, which will not likely impact your credit score too much. More information on credit score impact can be found in the next section of this guide.

Before beginning the pre-approval process, it is a good idea to consult the pre-approval checklist . Here are some examples of items and documents you may want to gather in advance. The exact documents that you will need may vary based on your employment and income situation, and other factors:

  • Two pieces of Government ID
  • NOAs (Notice of Assessments) or T1 Generals for the past two years
  • Letter of employment (confirming salary, position, and length of employment)
  • Proof of down payment through bank statements (some lenders may have minimum down payment requirements to reduce the riskiness of the loan)
  • Gift letter (if any portion of the down payment is being gifted by a third-party)
  • Proof of additional assets

An added benefit of pre-approval is that it can lock in a favourable interest rate for up to 120 days post-approval. This can help protect against rising interest rates without forcing you to rush the mortgage application process. Here at Clover Mortgage, we provide free pre-approvals and can help you get started today.

Much like a pre-qualification, a pre-approval cannot guarantee you will be approved for a mortgage loan. However, it can help expedite the mortgage approval process, and provide a more accurate estimate of how much your lender is willing to loan you. Typically, you will only be denied a mortgage after pre-approval if your financial situation or debt situation changes significantly between the time the pre-approval was received to the time the mortgage closes. Also, if any of the information is incomplete or inaccurate for your pre-approval, your may be denied the mortgage.

Your Clover Mortgage broker can help prepare an accurate and reliable pre-approval and equip you with the information you need to set yourself up for success.

Which Option Is Better For My Credit Score?

While many Canadians opt for both a pre-qualification and a pre-approval, others may choose to do just one or the other. If you are unsure whether to get pre-qualified or pre-approved, it is important to understand how each process can affect your credit score before determining the best choice for you.

Pre-qualification requirements can vary based on the scenario. You will likely be required to disclose basic financial information such as your annual salary, monthly housing payment, and savings. Some lenders will verify your credit, however this is not common at the pre-qualification stage, and if it is, some lenders will conduct a soft inquiry, which is an inquiry that will not affect your credit ratings.

Once you are pre-qualified, you may choose to proceed with a pre-approval, which requires a hard inquiry and can impact your credit score. While pre-qualification cannot guarantee mortgage approval, it can be a great choice if you believe you might be rejected. If you are rejected after a pre-qualification, your lender has only conducted a soft inquiry (or in most cases, no inquiry) at this point, and you are able to walk away without negatively impacting your credit score.

As part of the pre-approval process, your lender will need to pull and review your complete credit report from a Canadian credit agency. This type of inquiry is known as a hard inquiry and can negatively impact your credit score, however not by much in most cases. Beginning the hard inquiry process signals that you are looking to take out a serious loan, and this information will remain on your credit report for up to six years.

When you apply for a pre-approval with Clover Mortgage, our team will need to access your credit information so that we can begin contacting lenders. The good news is that we only need to pull your credit score once, and we can then spread it across our vast network of lenders. This prevents your credit from being pulled repeatedly, and limits the damage to your score.

If you are ready to begin shopping for a mortgage, contact Clover Mortgage to book your free pre-approval today!


Steven Tulman
Written By Steven Tulman
“Making the process of getting a mortgage an easy and enjoyable experience for every Clover Mortgage client!”