Mortgage Pre-Approval
1.0 The “Golden Ticket” for Homebuyers
Before you browse listings, before you attend an open house, and certainly before you fall in love with a home, there is one non-negotiable first step: getting a mortgage pre-approval. Think of a pre-approval as your golden ticket. It transforms you from a casual house-hunter into a serious, qualified buyer who is ready to make a confident and compelling offer. In the Edmonton market, being pre-approved is the single most important thing you can do to set yourself up for success.
2.0 What is a Mortgage Pre-Approval?
A mortgage pre-approval is a conditional commitment from a lender (like a bank or a mortgage broker) to lend you a specific amount of money at a specific interest rate for a set period (typically 90-120 days). To provide this, the lender will perform a detailed review of your financial situation, including your income, your credit score, and your down payment.
It’s important to understand that this is different from a simple “pre-qualification,” which is a rough estimate based on information you provide. For a detailed breakdown, see our guide on Pre-Approval vs. Pre-Qualification.
3.0 Why a Pre-Approval is Your Superpower
Having a pre-approval letter in hand gives you three key advantages in your home search:
- You Know Your Exact Budget: A pre-approval tells you the maximum amount you can borrow. This allows you to search for homes with confidence, knowing exactly what you can afford and preventing the disappointment of falling for a home that is outside your price range.
- You’re a Serious Buyer: When you submit an offer with a pre-approval letter, you are signaling to the seller that you are a serious, qualified buyer whose financing is already in place. This gives your offer significantly more weight, especially in a competitive situation.
- You Can Move Faster: In a market where desirable homes can sell quickly, speed is everything. A pre-approval allows you to make a strong offer immediately when you find the right home, without having to scramble to find out if you can get financing.
4.0 The Pre-Approval Process: What You’ll Need
To get pre-approved, you’ll need to provide your mortgage broker or lender with several key documents. It’s a good idea to gather these ahead of time:
- Proof of Income: Typically recent pay stubs and/or T4 slips.
- Letter of Employment: A letter from your employer confirming your position, salary, and length of employment.
- Proof of Down Payment: Bank statements or investment statements showing you have the funds for a down payment.
- Personal Identification: A driver’s license or passport.
- Permission for a Credit Check: The lender will need to pull your credit report to assess your credit score and history.
For a complete overview of the buying journey, return to the Ultimate Guide to Buying a Home in Edmonton.
Financial FAQs
Have more financial questions? Contact us for a free consultation.
How much income do I need to afford a home in Edmonton?
As a general guideline, lenders often use a Gross Debt Service (GDS) ratio of 32%. This means your total monthly housing costs (mortgage principal and interest, property taxes, heating) should not exceed 32% of your gross monthly income. For example, to afford a $1,800 monthly housing payment, you’d need a gross monthly income of around $5,625.
How does my credit score affect my mortgage application?
Your credit score is a critical factor. A higher score demonstrates to lenders that you are a reliable borrower, which allows you to qualify for the best interest rates. While it’s possible to get a mortgage with a lower score, a score of 680 or higher is typically required to qualify for the most competitive rates from A-lenders.
How much down payment do I need in Canada?
The minimum down payment depends on the home’s purchase price. For homes under $500,000, the minimum is 5%. For homes between $500,000 and $999,999, it is 5% on the first $500,000 and 10% on the remaining portion. For homes of $1 million or more, the minimum down payment is 20%.
What government programs can help me buy my first home?
First-time homebuyers in Canada can take advantage of several programs. The Home Buyers’ Plan (HBP) allows you to withdraw from your RRSPs tax-free for a down payment. There is also the First-Time Home Buyer Incentive, which is a shared-equity program that can lower your monthly mortgage payments.
Should I use a mortgage broker or go directly to my bank?
While your bank can only offer you their own products, a mortgage broker works with dozens of different lenders. They can shop the market on your behalf to find the best possible interest rate and mortgage terms for your specific situation, often saving you a significant amount of money over the life of your loan.
Continue Exploring Edmonton’s Best Communities
Top Family-Friendly Neighbourhoods
Discover communities with the best schools, parks, and family amenities.
Best Neighbourhoods for Young Professionals
Explore vibrant areas with great nightlife, restaurants, and easy commutes.
Find communities where you can live car-free, with shops and cafes at your doorstep.
Best Neighbourhoods for Dog Owners
Discover top spots with the best off-leash parks and extensive walking trails.
Top Communities for River Valley Access
Find homes just steps away from North America’s largest urban parkland.
