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GLOSSARY

Canadian Financial, Real Estate and Mortgage Glossary

How often this word is used
 
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Pre-approval Letter


Synonyms:proof of mortgage pre-approval
Filed Under: financial-banking, legal-contracts, mortgages
Tags: banking, contract, legal, mortgage
 

Definition of pre-approval letter

pre-approval letter
1. A written document that details how much a lender will give a potential home buyer based on the current interest rates and the buyer's credit history. The letter is issued by a lender or a mortgage broker and is used to instill confidence in a seller because it verifies that the buyer can obtain the funds needed for the transaction.

Related Terms and Acronyms:

  • approval   An assessment made by a lender of a borrower's ability to pay for a home and a confirmation of the amount the borrower may obtain.
  • commitment letter   A formal offer by a lender which states the terms under which it agrees to lend money to a home buyer. Also known as a "loan commitment." This letter will indicate the contingencies that must be cleared prior to funding the loan.
  • conditional commitment   A promise by a lender to make a loan if the borrower meets certain requirements.
  • firm commitment   A lender's promise to lend money to a specific borrower on specified terms at a certain time.
  • Mortgage Broker (MB)   One who finds clients perspective lenders at generally no cost. Mortgage Brokers have a special relationship with lenders and can offer their clients the best rates and service. CanEquity goes through great lengths to ensure you are serviced by the best Mortgage Brokers in Canada.
  • pre-approval   A process that mortgage lenders use to determine how much money they would lend you based on a thorough review of your financial situation. Lenders issue a pre-approval letter which strengthens your position when bidding on a home, as it shows sellers that you will be able to raise funds needed to purchase.
  • pre-approval expiry date   The date when a pre-approved mortgage expires, often 90 - 120 days after being pre-approved.
  • total debt service (TDS)   The ratio of a borrower's total monthly debt payments to his or her monthly gross income. Lenders use this ratio to determine how much of a loan a borrower is qualified for.

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