Both assessments can provide insight into your price range and the affordability of a potential home. Pre-qualification serves as a valuable tool for first-time homebuyers, helping them gauge their readiness for a home purchase and assisting in financial planning and goal-setting. On the other hand, a preapproval letter is strongly recommended when submitting an offer on a home. It serves as evidence that you are capable of fulfilling the financial commitment you are proposing, signaling to sellers that you are a committed and credible buyer, prepared to meet the offered price.

To secure pre-approval for a mortgage, initiate the process by submitting an application through a mortgage lender or bank, such as the Royal Bank of Canada. Most often, you can conveniently submit your preapproval application online. This application will inquire about various aspects of your financial situation, encompassing details about your employment, income, assets, debts, and down payment. Following this, the lender will conduct a credit check and furnish you with a conditional mortgage approval, usually valid for a period of 60, 90, or 120 days, contingent on the policies of the lender.

Mortgage preapproval entails a formal credit bureau report, commonly known as a “hard credit check,” which can have a temporary impact on your credit scores. Hard credit checks are typically associated with new lines of credit, and while the effect on your score is generally minor, with just a few points, repeated credit checks within a short timeframe could potentially have a more noticeable impact on your credit score.

The preapproval process involves a thorough examination of your financial situation, encompassing factors such as your income, existing debt and debt payments, assets, credit score, and other relevant aspects. Lenders seek consistency, so any significant changes such as switching jobs, making substantial purchases, or acquiring new credit cards may raise concerns. If your plan is to purchase a home within the next two years, it’s advisable to enhance your financial well-being in advance. Consider consulting with a financial planner and developing a carefully thought-out savings plan to better position yourself for the homebuying process.

The preapproval process varies in duration, ranging from a few hours to several days, with the actual time dependent on the lender. Gathering the necessary documents for preapproval can be time-consuming, and scheduling an appointment in advance might be necessary. Some lenders may take up to two weeks to provide a preapproval amount and letter. Engaging with an RBC mortgage specialist can streamline the process, helping you get organized and outlining a clear game plan for the entire homebuying journey—from document collection to making an offer and closing the deal. Pre-qualification serves as a valuable precursor to preapproval, often delivering results within minutes through an online form or phone application.

A mortgage preapproval typically remains valid for a period of 60, 90, or 120 days, contingent upon the policies of the lender. Beyond this timeframe, it becomes necessary to reapply for preapproval with your lender.

Obtaining pre-approval is strongly advised before making an offer on a home, making it an essential first step when you’re earnestly considering homebuying. It’s recommended to get pre-approved before engaging with a real estate agent to start touring homes. This ensures a clear understanding of your affordability, and with a preapproval letter in hand, you’ll be well-prepared to promptly pursue a home you find appealing.