When you buy an existing property, securing a mortgage approval before you commit to actually proceeding with the purchase takes a few steps. First, you would enter into a conditional purchase agreement with the current owner or builder at an agreed upon purchase price. The agreement would include a subject to financing, giving you time to confirm your mortgage before you pay your deposit to commit to buying the property.

Next, your mortgage application is typically reviewed within a week of entering into the conditional purchase agreement.   After the mortgage is approved, the subject to financing is removed and a deposit is usually due. Reaching this point means you and the owner have finalized the agreement, and the purchase will proceed in a few months or so. Finally, the property will be yours on what is referred to as the ’completion date’.  

A traditional mortgage approval is typically secured within approximately 30 – 120 days of the purchase completion date. 

Pre-construction, or pre-sale purchases, refer to condominiums, townhouses and other new builds, which have purchase agreements made much further in advance of the completion of the property. These purchases are sometimes referred to as pre-sales and can take up to 3 years to complete.

Some buyers will arrange pre-sale financing closer to the completion date of the purchase, and might wait until the property is about 4 – 6 months from completion.

However, as mortgages are subject to lender approval, an advance approval gives you the peace of mind the funds will be available to allow you to finalize on the purchase.

Like a traditional mortgage, the approval on a pre-sale mortgage is determined by your credit score, income-to-debt ratio, your employment history, the property’s value, and its characteristics.

Pre-sale mortgages including both a rate guarantee and an advance approval on the value of the property can in some cases be arranged as early as 18 months before the final purchase date.

Whether you’re seeking a pre-qualification to see how lenders may view your application, or you’re hoping to secure financing now for an existing property or future purchase, please reach out and discuss your options to ensure your plans can proceed smoothly.

Adapted From: https://dominionlending.ca/mortgage-tips/construction-and-pre-construction-mortgages