What Mortgage Preapproval Really Tells You

There is a sentence I hear that always makes me slow down. "My mortgage broker says it won't be an issue."

Sometimes that is true. Often it means nobody has actually looked at anything yet. I have had clients arrive with what they were told was a preapproval, and once someone finally dug into the relevant information, it turned out to be a prequalification. No documents pulled. No real file. And the amount they thought they had was not the amount they could get.

That is a rough thing to find out after you have fallen for a house. So it is worth being clear about what the word actually covers.

Prequalified is not preapproved

These get used interchangeably and they should not be. Only one of them means much when you are writing an offer.

Notice that even the strongest version stays conditional. That surprises people, and it is the next thing worth understanding.

A preapproval approves you, not the house

This is the part that catches people. A lender preapproving you has assessed you as a borrower. It has not looked at the property, because at that stage there is no property in the file.

Once you have an accepted offer, the lender looks at what you are buying, and that is a separate hurdle. An appraisal can come in below the purchase price. A condo building with a thin reserve fund or ongoing litigation can get declined. Some lenders will not lend on certain property types or certain issues found on an inspection.

Why I will not tell you to waive financing

I get asked about this, usually when a buyer wants to look stronger against competing offers. My position has not changed. I do not recommend waiving financing to win.

There are always other houses. Putting yourself in that position is not worth losing a deposit over. Plenty of agents will tell you it is how you compete, and in a fast market there is a real argument that a cleaner offer wins more often. I understand the logic. I still think the downside is out of proportion to the upside, because the downside is your money and it is not a small amount of it.

If you want to strengthen an offer, there are other levers. Deposit size, possession date, condition timelines. Start there.

Ask your broker about their process, not just their rate

Picking the right broker matters, and most buyers shop only on rate. Ask about process instead. Will you pull my documents up front. Is this a preapproval or a prequalification. What have you actually verified.

I keep a list of brokers I am comfortable recommending to clients, and I am happy to share it. The decision is always yours on who you use, and I am not going to speak poorly of anyone else in the business. I just want you working with someone whose process holds up when it gets tested.

The rules and the numbers behind the number

Canadian buyers still have to qualify at a higher rate than the one they will pay. The federal stress test requires qualifying at the greater of your contract rate plus two percent, or 5.25 percent. That is usually why the approved amount lands lower than a buyer expected based on what monthly payment feels comfortable.

Two federal changes are also worth knowing. The insured mortgage price cap rose from one million to 1.5 million dollars in December 2024, so homes above the old ceiling can be bought with less than twenty percent down. And thirty year insured amortization is available to buyers purchasing their first home. Longer amortization lowers the monthly payment and increases the total interest paid over the life of the loan. Both of those are true at once.

Check the current policy rate at the Bank of Canada and the insurance rules at CMHC rather than trusting a real estate site, including this one.

One local advantage worth naming. Alberta does not charge a land transfer tax. We pay land titles registration fees, currently a base of fifty dollars plus five dollars for every five thousand dollars of value, applied to both the transfer and the mortgage. Add legal fees, an inspection and tax adjustments, and you have a reasonable picture. Our mortgage calculator is a fine starting point for payment scenarios, but treat it as the start of the conversation with your broker, not the answer.

What this is really for

A preapproval is there to tell you exactly what you can afford, and to let us move quickly when we find the home you are in love with. Not having those steps in place is a sure fire way to miss out.

Gathering pay stubs, a letter of employment, tax filings if you are self employed, and proof of your down payment takes a few days. Doing that after you find the house takes the same few days, except now you are on a clock and competing.

This is general information rather than mortgage advice, and your situation is your own. Confirm your numbers with a licensed mortgage professional before you rely on them.