22 Feb Prequalified vs. Preapproved

Prequalified vs. Preapproved

With rates on the rise it is increasingly important to lock your rate in as a first step in your housing search.

1. There is a difference between a prequalification and a preapproval.  The latter is a rate hold.  With a prequalification the lender reviews the paperwork associated with your income and down payment and holds the rate.   This can be important if either is complicated.
2. Rate holds are typically for 120 days from date of submission to the closing date.  Some lenders will provide a longer rate hold for a new construction purchase (up to 2 years in some cases).
3. The rate hold can be refreshed at any point, but the new rate will be the rate on the day the refresh is requested.  This might be something to consider if rates are steadily moving up and a closing date will likely fall outside the 120 day window.
4. Pre-qualifications do not approve the property, just the covenant (the borrower).
5. You can get preapproved and prequalified for purchases, refinances and switches to new lenders.
6. You cannot get a rate held for a rental property.

Karen Lemieux
Mortgage Brokers Ottawa

Mortgage questions? Visit the link for a brief explanation of common mortgage terms.