Mortgage Pre-Approval vs. Pre-Qualification
Getting pre-qualified or pre-approved can help you move forward in the homebuying process. Discover the differences and which one is best for you.
Updated 
9 min. read
Buying a home in Canada is an exciting milestone. But going from browsing listings to calling a place your own requires various steps. Two of those steps are mortgage pre-qualification and mortgage pre-approval. While the terms are similar and sometimes used interchangeably, they serve different purposes. In this guide, learn the differences between being pre-qualified vs. pre-approved and how they can support you in obtaining a mortgage.
What is pre-qualification?
Mortgage pre-qualification is typically the first step you take to get a general idea of how much of a mortgage you can afford. As a homebuyer, you provide basic financial information to a prospective lender, including your current income, assets, and debt obligations.
In return, you can quickly get an estimate of what you can afford without impacting your credit score. Pre-qualification doesn’t involve a hard credit check, which can affect your score and show up on your credit report. During this step, there may be a soft credit check that won’t affect your credit score. For hopeful homebuyers, this is a no-strings-attached way to get more information.
Buying a home is a significant purchase. Through mortgage pre-qualification, you can get an idea of how much you can afford and what your mortgage loan amount might look like without impacting your credit.
Why is it important to get pre-qualified?
Mortgage pre-qualification isn’t a requirement in Canada, but it can be a smart idea if you’re browsing real estate listings and wondering what’s in your price range. In this competitive market, you want to be prepared and know your numbers.
It’s important to note that mortgage pre-qualifications are simply estimates and can change. The good news is that since they are estimates, they won’t affect your credit score.
Aside from understanding the type of home loan for which you are qualified, pre-qualification can also offer another benefit. At BMO, you can lock in today’s rate for 130 days in a minute when going through the mortgage pre-qualification process. This is the longest mortgage rate guarantee of any major Canadian bank.†† That way you can get today’s rate and secure it while looking for the right home.
How does pre-qualification work?
If you’re interested in buying a home, you can get pre-qualified by multiple lenders. Consider this the initial step beyond browsing and researching homes. You might be somewhat serious or casually looking, but ready to see where you are in terms of mortgage affordability.
When comparing mortgage pre-approval vs. pre-qualification, pre-qualification comes first. It’s an informal, introductory step to quickly assess your finances. Pre-approval is more in-depth and requires a more rigorous review of your finances.
How to get pre-qualified for a mortgage
Getting pre-qualified for a mortgage in Canada is a relatively quick process. At BMO, you can find out your pre-qualification status in just a minute. If you want to get pre-qualified for a mortgage, you can take the following steps:
- Make a list of Canadian lenders. You can get pre-qualified with multiple lenders.
- Ensure you meet eligibility requirements. For example, BMO requires you to be the age of majority, a Canadian resident, employed for the previous two years, and applying for a home you plan to live in.
- Gather information. You’ll be asked about your income, assets, and debt, so have that information ready. You can often use paystubs, tax returns, bank statements, and balances for credit cards, student loans, auto loans, personal loans, and similar documents.
- Apply online. Answer a few questions, provide your information, and hit submit.
- Get pre-qualified instantly. Your information will be reviewed and you’ll get pre-qualified. You’ll then receive an estimate of what you can afford, plus potential monthly payments.
What is mortgage pre-approval?
Mortgage pre-approval is a more in-depth process than mortgage pre-qualification. While pre-qualification can be useful in the browsing phase, a mortgage pre-approval is best for those who are serious about making moves on a new home.
Mortgage pre-approval is basically the vetting process by prospective lenders. You provide more information and your credit is checked to provide an actual amount and rate that you’re approved for by a lender. Whereas pre-qualification only provides an estimate, mortgage pre-approval is more powerful as it shows that a lender is approving you for a specific amount (though amounts can change if your information and circumstances change).
This offers buyers more control and flexibility, while also offering sellers more confidence and security. Mortgage pre-approval shows that you have a lender lined up and have the funds ready to purchase a property.
Why is it important to get pre-approved?
Getting a mortgage pre-approval from a prospective lender isn’t required as part of the homebuying process, but it is a good idea. It provides you with a concrete number for your budget when looking for homes, so you know exactly what you can afford and what is out of your price range.
Additionally, a mortgage pre-approval is a major step and shows that you’re ready to buy — which can be attractive to sellers and real estate agents. Not only that, but it can expedite the whole homebuying process and get you closer to getting a mortgage for your dream home.
How does pre-approval work?
To get pre-approved for a mortgage, you can contact a mortgage lender like BMO. Typically, you’ll get pre-qualified first and get a mortgage pre-approval as the next step in the process. If you’re curious about which is better — pre-approval or pre-qualification — pre-approval has more significance and has more influence. But if you’re ready to purchase a home, you can skip right to a pre-approval, as there's no need to do both.
Pre-qualification looks at your financial snapshot and offers estimates based on the data you provide. Pre-approval does a deep dive into your credit, finances, and more to assess what you can afford.
A mortgage pre-approval is a key part of your homebuying journey, so you know what you can afford and what your payments will look like.
How to get pre-approved for a mortgage
The mortgage pre-approval process can vary by lender. At BMO, you can hear back in minutes if you apply online. You can take extra time to apply with a Mortgage Specialist at a local branch, where you can ask questions and get personalized feedback. To get pre-approved for a mortgage, you can take the following steps:
- Identify mortgage lenders. Make a list of potential lenders you might want to work with. Compare rates, fees, customer service, and more. While you can get pre-approved with several, there is a hard credit check for every pre-approval, which may impact your credit score.
- Collect documents and financial information. The mortgage pre-approval process requires more information. You’ll need your Social Insurance Number (SIN), Canadian passport or driver’s license, and proof of employment (such as a paystub or employment letter). You may also be asked for information about your assets and liabilities, including bank accounts, investments, and any loans or debt you currently have.
- Apply for mortgage pre-approval. You can choose to apply online and submit your information. You’ll generally get a response in minutes after applying online.
Lenders will look at your financial picture to assess how much you can afford based on your current circumstances. Your credit score and debt-to-income ratio can affect the mortgage pre-approval process and determine how much you qualify for. If approved, you know exactly where you stand and can move forward with the homebuying process.
What’s the difference between pre-approved and pre-qualified?
New homebuyers may wonder “Is pre-approval the same as pre-qualification?” While they sound similar, there are some notable differences. So, what’s the difference between pre-approved and pre-qualified?
As part of the homebuying process, mortgage pre-qualification helps you to get an estimate on what you can borrow. Lenders will use your basic financial information to provide that estimate.
Mortgage pre-approval is the next step you take in the homebuying process to get a detailed budget and interest rate on a potential mortgage.
Think of mortgage pre-qualification like window shopping. You’re looking at price tags and considering your options. Mortgage pre-approval is like checking out and knowing exactly how much things will cost and you’re ready to move forward.
Both processes can help you on your journey to buying a new home. You’re equipped with information and can make choices based on that information. If you’re wondering which is better, there’s a clear answer: for serious homebuyers ready to make an offer, a mortgage pre-approval carries more weight. Unlike pre-qualification, pre-approval requires a credit check and a comprehensive review of your finances.
It also shows sellers that you’ve been vetted and have access to funds to make the transaction happen. This can move the process along faster, which can be a major benefit in a competitive market.
Mortgage pre-approval vs. pre-qualification
Remember the advantages of both mortgage pre-approval vs. pre-qualification when deciding on your next step:
Mortgage pre-qualification | Mortgage pre-approval |
|---|---|
| Requires a soft credit check | Requires a hard credit check |
| Provides an estimated approval range | Provides a detailed approval range |
| Within a minute (online with BMO), or up to 48 hours through other lenders | Within minutes (online with BMO), or up to 48 hours through other lenders |
| Briefly glances at your income and debt | Takes an in-depth look at your finances |
| Homebuyer’s first step | Homebuyer’s second step |
| Doesn’t cost anything | Doesn’t cost anything |
| Lock in your rate for 130 days with BMO† | Lock in your rate for 130 days with BMO†† |
There are some key differences between being pre-qualified vs. pre-approved. Knowing these differences can help you decide what’s the best fit and what the process entails.
The bottom line
When considering being pre-qualified vs. pre-approved, review where you’re at in the homebuying process. If you’re in the research phase and gathering information, pre-qualification can be a great first step.
If you’re in the thick of the homebuying process and want to move forward quickly, getting a mortgage pre-approval can be a significant advantage. In today’s competitive market, pre-approval is practically a necessity. It shows both buyers and agents that you’re ready to commit.
Getting a mortgage pre-approval with BMO allows applicants to lock in rates for 130 days, the longest mortgage rate guarantee of any major bank in Canada.†† This gives you a healthy window of time to search for your next home with confidence, knowing your budget and the rate you’ll get.
Wherever you’re in the process, BMO can support you on your journey and secure today’s rate when applying for a mortgage and connect you with an expert.
Frequently asked questions
It’s possible to get pre-approved or pre-qualified from multiple lenders. Keep in mind that getting pre-qualified typically doesn’t affect your credit, but getting a pre-approval might. Getting more than one pre-approval may affect your credit.
Interest rates are always changing. If rates change after you get pre-qualified or pre-approved, BMO will guarantee your original rate for a period of 130 days.
Typically, getting pre-qualified has no impact on your credit as there’s only a soft credit check. On the other hand, pre-approval requires a hard credit check and may impact your credit.
Your pre-qualification or mortgage pre-approval period can vary based on the lender. At BMO, pre-qualification and pre-approval secures a rate and is valid for 130 days.
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footnote dagger dagger details We guarantee your interest rate for the selected fixed rate mortgage type and term for up to 130 days from the rate guarantee start date. If the mortgage is not funded within the 130-day period, the interest rate guarantee expires. Applicable to residential mortgages only and subject to Bank of Montreal standard lending criteria for residential properties. Longest rate guarantee of any major Canadian bank as of September 5, 2023.