Mortgage Matters: Pre-approvals are key tools in the hunt for a home

The spring real estate market typically sees heightened activity, renewed opportunities and fierce competition among buyers and sellers. Spring brings better weather and usually an influx of new listings, and prospective buyers often see it as the optimal time to make a move.

But preparation is key, especially in a competitive market, where improving conditions can make it even more enticing.

Since September 2023, mortgage interest rates have continued to ease from their peak. On average, this has increased borrowing capacity by approximately 16.5 per cent as of January 2025. Did you know that as of December 15, 2024, first-time homebuyers who have a down payment of less than 20 per cent can amortize a mortgage up to 30 years, up from 25?

In combination with lower rates, the extended amortization will increase borrowing capacity by 27 per cent over the September 2023 qualifying criteria. In other words, someone who qualified for a $600,000 mortgage in September 2023 may now qualify for one as high as $775,000, a significant increase in buying power.

In this environment, a critical first step for buyers is to secure a written mortgage pre-approval, a tool that can help them navigate the market with confidence, secure favorable terms and achieve their homeownership dreams. Not only will this make house-hunting more efficient, real estate agents and sellers will take them more seriously.

A pre-approval from a lender states that you qualify for a certain amount based on your financial circumstances. This differs from pre-qualification, which provides a rough estimate of your borrowing power without a comprehensive financial review. A pre-approval is more thorough and includes:

Lenders review pay stubs, tax returns and other income documentation to assess your earnings.

Your credit history and score are critical factors in determining loan eligibility and interest rates.

Lenders evaluate your monthly financial obligations relative to your income to ensure you can manage a mortgage.

Savings accounts, investments and other assets are considered to confirm you have sufficient funds for a down payment and closing costs.

Once approved, the lender provides a pre-approval letter specifying the loan amount and conditions. This document is valid for a limited time, typically 90 to 120 days.