Real Estate

Mortgage Pre Approval

  • Last Updated:
  • Aug 3rd, 2020 8:43 am
[OP]
Newbie
Jun 10, 2018
18 posts
8 upvotes

Mortgage Pre Approval

So me and my partner had a spur of the moment decision of buying a pre construction lot from a builder. They are holding it for us until Wednesday and hopefully by then I will have my pre approval.

I contacted the builders reps from RBC and CIBC but they havent gotten back to me guessing cause its the weekend, just wondering if they get ahold of me by Tuesday how long will it take them to get a pre approval?
What do I need to provide them with as in documents?
If there are any brokers on here or if anyone knows any brokers that could get it done faster PM please.
13 replies
Sr. Member
Nov 25, 2009
583 posts
334 upvotes
Vancouver
Don't purely rely on the pre-approval, get a builder's mortgage (firm approval) if it's available.

Pre-approval is generally useless and things can change a lot come closing. The only thing it's useful for is figuring if you can afford it at this moment in time.

Also it takes a few days I believe (at least for when I did it? since they have to run the credit checks.
Sr. Member
Jul 15, 2019
656 posts
509 upvotes
Undisputed1900 wrote: So me and my partner had a spur of the moment decision of buying a pre construction lot from a builder. They are holding it for us until Wednesday and hopefully by then I will have my pre approval.

I contacted the builders reps from RBC and CIBC but they havent gotten back to me guessing cause its the weekend, just wondering if they get ahold of me by Tuesday how long will it take them to get a pre approval?
What do I need to provide them with as in documents?
If there are any brokers on here or if anyone knows any brokers that could get it done faster PM please.
For pre-construction from the builder you only need a pre-approval, you can simply do the online pre-approval from TD-Canada... its no hard hit, and will give you an instant pre-approval if you have no issues on your credit.
Sr. Member
Jul 15, 2019
656 posts
509 upvotes
lawonga wrote: Don't purely rely on the pre-approval, get a builder's mortgage (firm approval) if it's available.

Pre-approval is generally useless and things can change a lot come closing. The only thing it's useful for is figuring if you can afford it at this moment in time.

Also it takes a few days I believe (at least for when I did it? since they have to run the credit checks.
I'd avoid getting a firm approval this early on the process, builder mortgages generally are harsh rates... not worth it. You should already be aware of risks in regards to pre-construction, so if you have secure employment as you should be if you are getting a new construction home... I'd wait it out. 3months out from closing is when you go for the firm approval.
Sr. Member
Nov 25, 2009
583 posts
334 upvotes
Vancouver
freeman93 wrote: I'd avoid getting a firm approval this early on the process, builder mortgages generally are harsh rates... not worth it. You should already be aware of risks in regards to pre-construction, so if you have secure employment as you should be if you are getting a new construction home... I'd wait it out. 3months out from closing is when you go for the firm approval.
Check the terms and conditions, those rates are floating and you can bail out anytime from them before you actually close (at least in my case). This means come closing the rates will usually change (lower, same, but never higher), and usually will beat/match competitive rates.
Sr. Member
Jul 15, 2019
656 posts
509 upvotes
lawonga wrote: Check the terms and conditions, those rates are floating and you can bail out anytime from them before you actually close. This means come closing the rates will usually change (lower, same, but never higher), and usually will beat/match competitive rates.
If you look at the real-estate mortgage rates thread, you will see anytime it's asked if someone should firm up that early, it's always recommended against. Also most builder mortgages are for custom builds, not from track builders.
Sr. Member
Nov 25, 2009
583 posts
334 upvotes
Vancouver
freeman93 wrote: If you look at the real-estate mortgage rates thread, you will see anytime it's asked if someone should firm up that early, it's always recommended against. Also most builder mortgages are for custom builds, not from track builders.
But why would you avoid it if you can unilaterally bail out at any point in time before you actually close?

Heck you can get multiple builders mortgage approvals from multiple banks and then get a pre-approval later on and no one would bat an eye, provided that the T&C let's you do it...

Also depending on market and developer, they can be available for tract builds too. Anecdotally the one I used was a tract builds, but yeah that's why I suggested to get a builder's mortgage if it's available... Because it's not always available.
Last edited by lawonga on Aug 3rd, 2020 12:53 am, edited 1 time in total.
Sr. Member
Jul 15, 2019
656 posts
509 upvotes
lawonga wrote: But why would you avoid it if you can unilaterally bail out at any point in time before you actually close?

Heck you can get multiple builders approvals from multiple banks and then get a pre-approval later on and no one would bat an eye, provided that the T&C let's you do it...
if you can show me a link to a lender that allows you to firm up a mortgage 8-12months in advance of closing, but bail out at anytime without a penalty... I am all ears, and willing to change my opinion.
Sr. Member
Nov 25, 2009
583 posts
334 upvotes
Vancouver
freeman93 wrote: if you can show me a link to a lender that allows you to firm up a mortgage 8-12months in advance of closing, but bail out at anytime without a penalty... I am all ears, and willing to change my opinion.
I don't have anything to give you for the part that me walk away because.. I didn't actually sign anything and neither did they, but I can give you what the mortgage specialist gave me (with the rate adjustment at closing):

Here's one for RBC:
https://imgur.com/a/BsS3dKu
Sr. Member
Jul 15, 2019
656 posts
509 upvotes
lawonga wrote: I don't have anything to give you for the part that me walk away because.. I didn't actually sign anything and neither did they, but I can give you what the mortgage specialist gave me (with the rate adjustment at closing):

Here's one for RBC:
https://imgur.com/a/BsS3dKu
Certainly is very cool to see, however, you are still stuck with a big 5 mortgage rate... which generally is higher, and the breaking penalty is larger.

You didn't show in that image whether there are fees to leave them prior to close though? Do you have those details?
Sr. Member
Nov 25, 2009
583 posts
334 upvotes
Vancouver
freeman93 wrote: Certainly is very cool to see, however, you are still stuck with a big 5 mortgage rate... which generally is higher, and the breaking penalty is larger.

You didn't show in that image whether there are fees to leave them prior to close though? Do you have those details?
No, like I said.. I didn't sign anything, they didn't sign anything. Nothing was committed on my end so I could literally walk away if I wanted to. NO T&C at all about committing or walking away. It felt more like they were just trying to get your business instead.

Went with TD.. same thing. They gave me a lower starting rate tho.
Sr. Member
Jul 15, 2019
656 posts
509 upvotes
lawonga wrote: No, like I said.. I didn't sign anything, they didn't sign anything. Nothing was committed on my end so I could literally walk away if I needed to. It felt more like they were just trying to get your business instead.

Went with TD.. same thing. They gave me a lower rate tho.
I am just trying to see the benefit... when the hedge rate is 4.19% which is almost impossible(never know) for us to see in the next 2-3 years. But, I can see why some may want that peace of mind.
Sr. Member
Nov 25, 2009
583 posts
334 upvotes
Vancouver
freeman93 wrote: I am just trying to see the benefit... when the hedge rate is 4.19% which is almost impossible(never know) for us to see in the next 2-3 years. But, I can see why some may want that peace of mind.
Exactly, peace of mind was the benefit considering how risky pre-approvals are (I bought the thing solo so even more safety was needed). But yeah I got it when the interest rates were going up really quickly last year or so, which was why the rate was so high.
[OP]
Newbie
Jun 10, 2018
18 posts
8 upvotes
Another question, does the bank go off of your employment letter salary or your T4 salary?

As well my partner has only been at her job for 1 year (new grad) but by the time closing will come around it will be closer to 2 years will this have a big effect on getting pre approved?

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