Every mortgage is specific to a property. You need a commitment from a lender for the property you have agreed to purchase.
There’s a little bit of marketing that takes place when you’re getting a mortgage. Lenders want your business, so they’ll offer pre-qualifying and pre-approvals as a way of enticing you to borrow from them. Pre-qualifying isn’t much more than marketing. A pre-approval isn’t worthless – it holds your interest rate (usually for 120 days) and gives you some certainty – but it is not a mortgage.
How the real mortgage and mortgage commitment process works
Once the Offer to Purchase is accepted, your realtor will send you an Agreement of Purchase and Sale. That document, along with your mortgage broker version of the property’s MLS listing, is what the Lender will scrutinize. When they are satisfied they’ll issue a Mortgage Commitment. You still don’t quite have a mortgage.
Commitments have conditions
A Lender may have any number of supplemental questions before issuing the Commitment. They need to gain a complete understanding, of every facet of the transaction, prior to committing their financial institution to the deal. These questions are good and can help you as well. It is better to find out if something is problematic at this stage as opposed to finding out at the last minute.
What types of details will the Commitment ask for?
Commonly, a home valuation (estimated price) in the form of an appraisal. A list of current income documents. The down payment and closing costs must be reviewed. Finally, the lawyer is provided with a lengthy list of items to address. In sum, a mortgage pre-approval is more pre than approval. It gives you a budget and a fixed-rate window for you to shop, but it is not a mortgage.