~ Rate Holds, Pre-Approvals ~
Do ANY of them actually mean something?
I have seen this time and again when I talk to a new clients and they state that they have been "pre-approved" by a bank or mortgage broker and yet on the last day of the transaction closing we have problem getting the property financed
So what is Really a definition of the Pre-approval?
Here are 2 most common answers:
•A confirmation or certificate that gives a borrower the assurance to write a purchase offer without a "Subject to
•The process of calculating Debt Service Ratio(DSRs) and reviewing support documents to determine if the borrower meets a particular lender’s guidelines for funding. In studying Canada’s broker-friendly lenders, we’ve found many variations in pre-approvals, but just one common reality: Virtually no lender actually offers a pre-approval that matches the marketplace’s definition.
If you visit your banker and ask him/her what's the difference between Pre-approval and Rate Hold they will tell you that there is no difference.
They are both the same thing. So when you get your pre-approval from your lender, all it means
is that they will hold the rate for the next 60 or 90 days.
When you have an accepted offer in place you will still have to go through the whole approval process where the lender looks at your DSR as much as the value of the property.
To avoid stress while buying a Real Estate, have a discussion with your mortgage broker and make sure that you put a "subject to the financing being approved" before you make your contract firm and binding.