Pre-Approved vs. Pre-Qualified: Here’s What You Need To Know


While mortgage pre-qualifications and pre-approvals may sound similar (and represent important steps in the home buying process), they are, in fact, two very different things.

What is a Mortgage Pre-Qualification?

A mortgage pre-qualification is step one in the overall mortgage process, giving you a precursory glance at what you might be able to afford for a home. At this stage, you and your mortgage broker will sit down and take a high-level look at your finances to determine how much loan you may be qualified to borrow.

Taking your income, assets and debt into consideration, your broker will determine how much home you can afford using the following calculations or ratios:

Your Gross Debt Service Ratio (GDS) = The percentage of your monthly income needed to cover your housing costs such as your mortgage payment, taxes, heating costs and 50% of condo fees, if applicable. Combined, these costs should not exceed 39%.

Total Debt Service Ratio (TDS) = The percentage of your monthly income needed to cover your housing costs such as your mortgage payment, taxes, heating costs, 50% of condo fees and any other debt you may carry. Combined, these costs should not exceed 44% of your income.

A Debt Service Calculator can help you determine your GDS and TDS ratios.

Getting a pre-qualification is as simple as reaching out to your mortgage broker over the phone. Quick and easy, it allows you to determine if you’re ready to take the next step in the home buying process or if you should improve your finances before progressing to the next stage.




What is a Mortgage Pre-Approval?

A mortgage pre-approval takes things to the next level. Unlike a pre-qualification, which is an estimate of what you can afford, the pre-approval process takes a deeper dive into your finances. After receiving your mortgage application (your broker will help you with this), your lender will take a much closer look at your financial situation (everything we mentioned above), as well as your credit score.


Once the lender confirms you meet their loan requirements, they will issue your mortgage pre-approval. In short, the pre-approval is a commitment from the lender to loan you a specified amount, at a set interest rate, for a home. Typically, good for 60-120 days, a pre-approval doesn’t guarantee you’ll receive your mortgage loan (there is one final approval process). Still, it will simplify the home buying process and ensure you’re taken more seriously by sellers.

For more information on how the Edmonton Broker can help you reach your mortgage goals, reach out to us! Or, fill out our quick and easy online application form, it only takes a moment!


Photo credits: freepik.com


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Contact Info
Daniel De Sousa
780-974-1270
#204, 10941 - 120 St
Edmonton, AB

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