A Mortgage Pre-Approval is not what you might expect it to be

Martin Jensen • July 20, 2017

Although going through the pre-approval process is more important than ever, the actual term ‘pre-approval’ is often misleading. It really addresses just a few variables that may arise once in the middle of an actual offer.

The pressure in many markets has never been greater to write a condition-free offer, yet due to recent changes to lending guidelines by the federal government, the importance of a clause in the contract along the lines of ‘subject to receiving and approving satisfactory financing’ has also never been greater. (There are variations to be discussed with your Realtor around the specific wording of such clauses.)

Often clients are reluctant to write the initial offer on a property without feeling like they are 100 per cent pre-approved. An understandable desire. The risk being that many clients then falsely believe they have a 100 per cent guarantee of financing, and this is not at all what a pre-approval is.

A lender must review all related documents, not just the clients personal documents, but also those from the appraiser and the realtor as the property itself must meet certain standards and guidelines.

The pre-approval process should be considered a pre screening process. It does involve review and analysis of the clients current credit report, it should also include a list for the client of all documents that will be required in the event that an offer is written and accepted. Ideally your Mortgage Broker will review all required documents in advance, but few lenders will review documents until there is an accepted offer in place.

Clients should come away from the initial process with a clear understanding of the maximum mortgage amount they qualify for along with the various related costs involved in their specific real estate transaction. Equally as important; a completed application allows the Mortgage Broker to lock in rates for up to 120 days.

Why won’t a lender fully review and underwrite a pre-approval?

  • Lenders do not have the staff resources to review ‘maybe’ applications – they have a hard enough time keeping up with ‘live’ transactions.
  • The job you have today may well not be the job you have by the time you write your offer. (ideally you do not want to change jobs while house-shopping)
  • If more than four weeks pass then most of the documents are out of date by lender standards, and a fresh batch needs to be ordered and reviewed with the accepted offer.
  • The conversion rate of pre-approvals to ‘live transactions’ is less than 10 per cent, and this alone prevents lenders from allocating recourse to reviewing pre-approvals.

It is this last point in particular that makes it so difficult to get an underwriter to completely review a pre-approval application as a special exception. Nine out of ten times that underwriter is spending their time on something that will never actually happen.

The bottom line is that a clients best bet for confidence before writing an offer is the educated and experienced opinion of the front-line individual with whom they are directly speaking, their Mortgage Broker. Although this individual will not be the same person that underwrites and formally approves the live transaction when the time comes they likely have hundreds of files worth of experience behind them. That experience is valuable.

It is due to the disconnect between intake of application and actual lender underwriting a live file that having a ‘subject to receiving and approving satisfactory financing’ clause in the purchase sale agreement is so very important.

Without a doubt the most significant factor in recent years which has undermined clients preapprovals is the relentless pace of government changes in lending guidelines and policies. Change implemented not only by the Government also by the lenders themselves. It is very easy to have a pre-approval for a certain mortgage amount rendered meaningless just a few days later through changes to internal underwriting guidelines. Often these changes arrive with no warning and existing pre-approvals are not grandfathered.

So, while it is absolutely worthwhile going through the pre-approval process before writing offers, and in particular before listing your current property for sale it is most important to stay in constant contact with your Mortgage Broker during the shopping process.

Be aware that aside from the key advantage of catching small issues early and securing rates a pre-approval is NOT a 100 per cent guarantee of financing.


This article was originally published in the Dominion Lending Centres June 2017 newsletter.

RECENT POSTS

How Property Type and Condition Influence Mortgage Financing

By Martin Jensen • September 16, 2026
Why the Property Matters When You’re Qualifying for a Mortgage When qualifying for a mortgage, lenders typically look at four core areas: Income Credit Down payment or equity The property itself Most buyers focus heavily on income, credit, and savings—and for good reason. But even if those boxes are checked, the property can still determine whether a mortgage is approved. Why Lenders Care About the Property From a lender’s perspective, the property is the collateral for the mortgage. In the unlikely event of default, they need to know the home can be sold quickly and at fair market value to recover their funds. Because of this, lenders are careful about the condition, value, and marketability of any property they finance. Homes that are in poor repair, unconventional, or overpriced can raise red flags—even when the borrower is well qualified. Appraisals Are Always Part of the Process Every mortgage requires an appraisal to confirm value. Insured mortgages (through CMHC, Sagen, or Canada Guaranty) often use an automated valuation model completed online. Conventional mortgages typically require a full, on-site appraisal by a certified appraiser. This appraisal is not optional and happens after an offer is accepted—not at the pre-approval stage. Why Pre-Approvals Aren’t a Guarantee A pre-approval is a great first step, but it only assesses you, not the property. Once you’ve made an offer, the lender must approve the specific home you’re buying. Understanding this upfront helps avoid surprises and confusion later in the process. The Risk of Buying Without a Financing Condition In competitive markets, buyers sometimes remove financing conditions to strengthen their offer. However, this comes with risk. If the appraisal comes back low—or the lender is concerned about the property’s condition—you could be denied financing after the offer is firm. In that scenario, your deposit may be at risk. Buying a Home That Needs Work If you’re considering a property that isn’t in perfect condition, there are solutions. A purchase plus improvements program allows you to buy a home and include renovation costs in your mortgage. The process is structured and requires planning, but it can be an excellent way to turn a fixer-upper into a great long-term investment. Final Thoughts Mortgage approval isn’t based solely on your finances—the property matters just as much. Knowing this ahead of time helps you make smarter offers, reduce risk, and plan more effectively. If you’re buying a property that needs work or want clarity on how a lender may view a specific home, feel free to reach out. I’d be happy to walk you through your options and help you plan with confidence.

Wait! Are You Really Ready to Buy That Home?

By Martin Jensen • September 9, 2026
So, you’re thinking about buying a home. You’ve got Pinterest boards full of kitchen inspo, you’re casually scrolling listings at midnight, and your friends are talking about interest rates like they’re the weather. But before you dive headfirst into house hunting— wait . Let’s talk about what “ready” really means when it comes to one of the biggest purchases of your life. Because being ready to own a home is about way more than just having a down payment (although that’s part of it). Here are the real signs you're ready—or not quite yet—to take the plunge into homeownership: 1. You're Financially Stable (and Not Just on Payday) Homeownership isn’t a one-time cost. Sure, there’s the down payment, but don’t forget about: Closing costs Property taxes Maintenance & repairs Insurance Monthly mortgage payments If your budget is stretched thin every month or you don’t have an emergency fund, pressing pause might be smart. Owning a home can be more expensive than renting in the short term—and those unexpected costs will show up. 2. You’ve Got a Steady Income and Job Security Lenders like to see consistency. That doesn’t mean you need to be at the same job forever—but a reliable, documented income (ideally for at least 2 years) goes a long way in qualifying for a mortgage. Thinking of switching jobs or going self-employed? That might affect your eligibility, so timing is everything. 3. You Know Your Credit Score—and You’ve Worked On It Your credit score tells lenders how risky (or trustworthy) you are. A higher score opens more doors (literally), while a lower score may mean higher rates—or a declined application. Pro tip: Pull your credit report before applying. Fix errors, pay down balances, and avoid taking on new debt if you’re planning to buy soon. 4. You’re Ready to Stay Put (At Least for a Bit) Buying a home isn’t just a financial decision—it’s a lifestyle one. If you’re still figuring out your long-term plans, buying might not make sense just yet. Generally, staying in your home for at least 3–5 years helps balance the upfront costs and gives your investment time to grow. If you’re more of a “see where life takes me” person right now, that’s totally fine—renting can offer the flexibility you need. 5. You’re Not Just Buying Because Everyone Else Is This one’s big. You’re not behind. You’re not failing. And buying a home just because it seems like the “adult” thing to do is a fast way to end up with buyer’s remorse. Are you buying because it fits your goals? Because you’re ready to settle, invest in your future, and take care of a space that’s all yours? If the answer is yes—you’re in the right headspace. So… Are You Ready? If you’re nodding along to most of these, amazing! You might be more ready than you think. If you’re realizing there are a few things to get in order, that’s okay too. It’s way better to prepare well than to rush into something you're not ready for. Wherever you’re at, I’d love to help you take the next step—whether that’s getting pre-approved, making a plan, or just asking questions without pressure. Let’s make sure your homebuying journey starts strong. Connect anytime—I’m here when you’re ready.

Bank of Canada Holds Rate at 2.25% — September 2, 2026

By Martin Jensen • September 2, 2026
The Bank of Canada announced today that it is holding its target for the overnight rate at 2.25%, with the Bank Rate at 2.5% and the deposit rate at 2.20%. While Canada's economic recovery is broadening, a new layer of uncertainty has entered the picture. Here is what happened and what it means for your mortgage.