Pre-qualifying is the first step in the process of becoming a homeowner. It's a simple sit down with your bank or mortgage broker, and providing them with the information about your paycheque, any car loans or credit cards. It can even be done by phone or online. The bank or broker then let you know the amount of mortgage that you qualify for, although this mortgage amount is based on unverified data.

Pre-approval requires providing the bank or broker with all your verified data. You'll fill in the official mortgage application. You'll allow the bank to do a credit check on you, provide a letter from your employer confirming your employment and provide your CRA statement of accounts from the last two years. Proof of your deposit and the origin, and the bank will do an in-depth look at your finances. You will have a written commitment with an interest rate held for you, typically three months.

The final step is to have an accepted subject contract on your new home. At this point, the bank with "qualify" the house by having an appraisal on the property ordered. Once the bank approves the property, you are in a position to remove the conditions and move forward on your home.
Lastly, but most importantly, once you have pre- approval, don't make any changes to your financial status. Don't get a car loan or new credit card. Keep your financial picture consistent with the pre-approval or better yet save more money!

In circumstances with more than one offer, showing a commitment letter, puts you ahead of the pre-qualified person. Plus, take the stress out of the situation when you have the offer, you've already pulled out all the obscure paperwork, requested information from other sources and you are good to go!