Accounting Advice on How to Get a Mortgage Pre-Approval Posted on Jan 24, 2021

Courtesy of Nadia Chentsova, Real Estate Bay Realty Brokerage

Getting a mortgage pre-approval is a great first step in the home buying process. Getting a mortgage pre-approval involves meeting up with a loan officer, so, they can go over your finances — income, debt, assets, and credit history — to determine how much money you can borrow, how much you could pay per month, and what your interest rate will be.

The following accounting advice will help strengthen your chances of receiving a mortgage pre-approval and increase your confidence when you meet with your financial institution or loan officer.

Your Current Financial Situation


To get a mortgage pre-approval, you will need to be able to prove your current financial situation and the state of your bank accounts. This will include showing which banks you are with, the branch you’re a part of and all the balances of all of your bank accounts.

Proof of Debts


Lenders aren't very keen on giving money to someone who owes a lot of money to other people. That’s why it's suggested that you try to clear up as many debts as possible before trying to receive a mortgage pre-approval. The potential lender will want information on all of your debts, including but not limited to:

• All credit cards and lines of credit

• Spousal or child support

• Vehicle leases and payments

• Student loans

• Personal loans

• Bankruptcy or consolidated payments


Your Credit Score


Finding out your credit score is an integral part of the mortgage pre-approval process. The lender will ask you for permission to pull your credit history, which you will have to sign off on. To maintain or improve your credit score, make sure you follow these effective methods:

• Pay all your bills on time

• Keep your credit usage (also known as your debt to income ratio) below 35 percent of your income

• Be loyal to your credit card and don’t jump back and forth to new ones

• Stay away from all unnecessary debts

• Remember that a variety of credit types is a healthy way to increase your credit score.

Information on your current property


A lender will want to know all information about your current home situation if you own a home already. This will include a recent mortgage statement featuring information about your mortgage payments, your current homeowner insurance policy, most recent property tax bill/statement, legal description of the property, and the property’s value. In case if you rent a property, then proof of your monthly payments will be required.

Proof of Employment and Tax Information


You will need to provide information about where you’re working and how long you’ve been there. The longer you’ve worked for the same place the better your chances of getting a mortgage pre-approval. What you will need to show a lender depends on if you have salaried or hourly employment OR if you’re self-employed or on contract.

If salaried or hourly you will need to provide:

• A letter from your employer on company letterhead, which has your name, length of employment, salary or hourly pay rate, and the name and title of the persons signing the letter

• Proof of income — T4 slips, copies of at least your last two pay stubs, personal tax returns, and a notice of assessment for the last two years

• Copy of current bank account statement showing direct deposit of your income

If you’re self-employed or on contract:

• Provide your last two years of assessments from the CRA

• Statement of business activities

You should also be clear with your bank about your debts or any other financial obligations.  Full transparency about your other payments will help you to get approved for the amount that you can actually afford, and service this mortgage on a monthly basis.