Stages of a Mortgage: 3. Pre-approval
Pre-approval is a bank's first concrete answer: a letter confirming, with terms and figures, that it's willing to finance your purchase.
When it starts and when it ends
The pre-approval stage starts where viability analysis ends, and it's the shortest one to describe — but also the most anticipated. It ends when a bank sends the pre-approval letter: the first formal document confirming that, based on its review, it's willing to finance your purchase.
What a pre-approval letter says
The letter typically states the maximum financing amount, the term considered, and an indication of the terms (rate, spread) the bank is working with. It isn't a final approval yet — the property itself still needs to be appraised — but it's the strongest signal so far that the deal is viable.
In practice, it's also the document that lets you move forward with an offer with confidence: many sellers and real estate agents ask for proof of pre-approval before accepting one.
Why you might receive more than one letter
Since your file went to several banks in the previous stage, it's common to receive more than one pre-approval letter — each with slightly different terms. This is the stage where you compare offers: the highest amount or the lowest rate, on their own, don't always define the best option — it's worth looking at the whole package (spread, fees, associated insurance).
What happens next
With a pre-approval in hand — and, usually, a property already identified — the process moves to property appraisal, the last step before final loan approval.
