Michael A. Jones - PREC* | Royal LePage Kelowna
I want to tell you about a situation I've been part of. It's stressful. It's expensive. And looking back, I could have done more to prevent it.
A buyer receives an email from their mortgage broker. The email says something like: "You're approved w/ conditions" or "You're conditionally approved." The buyer reads the word "approved" and assumes the financing is in place. They tell me they are ready to remove the financing condition. The condition gets waived. The deal becomes firm.
Then the conditions don't get satisfied. The lender can't fund. The buyer is now legally obligated to complete a purchase without financing in place.
I've had clients forced to scramble for alternative financing at rates far higher than what they originally anticipated. The deposit was at risk. Legal costs climbed. The stress was significant. And while the miscommunication happened between my clients and their mortgage broker, I was their REALTOR®. I should have asked one more question before we proceeded.
That experience changed how I work. Now I ask every client, every time, before we touch a financing condition: "Do you have written confirmation of full approval from your broker?" Not conditional. Not pre-approved. Full.
This post exists so you understand what to look for, and so I can be straight with you about what I learned.
Pre-Approval Is Not Approval
Before you write an offer, your broker will likely help you get pre-approved. This is a useful step. It gives you a budget range and shows sellers you are a serious buyer.
But pre-approval is not a guarantee of financing.
A pre-approval is based on your stated income, debts, and credit profile at a point in time. The lender has not yet reviewed a specific property. They have not yet verified your current financial situation against the actual transaction. The Government of Canada is explicit about this: a pre-approval does not guarantee you a mortgage.
If your financial situation changes between pre-approval and closing, the lender can withdraw. If the property doesn't appraise at the purchase price, the lender can reduce the amount they will lend. Pre-approval is the starting point. It is not the finish line.
What Conditional Approval Actually Means
After you have an accepted offer and your broker submits your file to a lender, an underwriter reviews your application. If the underwriter is generally satisfied, they issue what is called a conditional commitment. Your broker may communicate this to you as "conditional approval" or "approved with conditions."
Here is the part that matters: conditional approval means the lender is willing to lend, but only after you satisfy specific conditions. Those conditions must be met. Every single one of them. Until they are, you do not have financing.
Common conditions attached to a conditional approval include:
- Proof of current income and employment
- A current letter of employment or recent pay stubs
- Property appraisal at or above the purchase price
- Confirmation that down payment funds are verified and sourced
- Satisfactory title search on the property
- Mortgage default insurance approval (if applicable)
- Additional documentation specific to your financial situation
Any one of these conditions can prevent final approval if it isn't met. An appraisal that comes in low. An employment letter that shows a recent job change. A title issue that wasn't anticipated. These things happen. When they do, a conditional approval falls apart.
"Conditionally approved" does not mean approved. It means: approved, provided nothing goes wrong.
What Full Approval Actually Means
Full approval is also called firm approval or unconditional approval. It means the underwriter has reviewed all conditions, all documentation has been accepted, and the lender is committed to funding your mortgage.
This is the only point at which it is safe to waive your financing condition.
Full approval is typically confirmed in writing. Your broker should send you a clear communication stating that all conditions have been satisfied and the lender has issued final approval. That email or letter is the document you are waiting for.
If you have not received that communication in clear, unambiguous language, you do not have full approval.
The Three Stages, Simply Put
Think of it this way:
- Pre-approval: The lender thinks they can work with you, based on what you've told them. Nothing is verified against a specific property.
- Conditional approval: The lender is willing to proceed, but you have outstanding requirements to satisfy. You are not approved yet.
- Full approval: All conditions are satisfied. The lender is committed. This is the green light.
Only full approval is approval.
What I Experienced With My Clients
I had clients who received an email with language that suggested their financing was in place. They felt confident. They told me they were ready to waive. I walked them through the email carefully. The language was unclear. I encouraged them to confirm with their broker before we proceeded. That one worked out.
Another situation did not go as well. Clients came to me ready to remove conditions. The broker's email had used conditional approval language. My clients read it as a green light. I didn't push back hard enough. We removed the condition. The original lender could not satisfy the outstanding requirements in time. My clients were legally obligated to complete. They found alternative financing, but at a significantly higher rate. The cost difference over the life of that mortgage was real money.
That one stayed with me. My clients were not careless people. The language in the email was genuinely ambiguous. But I was their REALTOR®, and part of this job is knowing where the landmines are. I should have asked one more question. I didn't. Now I always do.
The Rule You Need to Follow
Read every email from your broker carefully. Look for the specific words.
"You're approved with conditions" means you are not yet approved.
"You're conditionally approved" means you are not yet approved.
"Pre-approval is confirmed" means you are not yet approved.
The only message that gives you a green light is one that clearly states all conditions have been satisfied and full, unconditional approval has been granted. If the email is unclear, call your broker. Ask directly: "Are all conditions satisfied? Do I have full approval? Is it safe to waive my financing condition?"
Do not waive your financing condition based on a verbal conversation alone. Get the confirmation in writing. Keep that email. If your broker cannot give you that written confirmation, do not waive the condition.
Your financing condition protects your deposit. It protects your legal liability. It gives you an exit if financing falls through. Waiving it before you have full written approval removes that protection entirely.
What to Ask Your Broker Before You Waive
Before you or your REALTOR® removes a financing condition, get written answers to these questions from your broker:
- Have all lender conditions been satisfied?
- Has the lender issued full, unconditional approval?
- Has the property appraisal been completed and accepted?
- Is there anything outstanding that could prevent funding?
- Are you confirming in writing that it is safe to waive the financing condition?
If the answers are not clear and in writing, wait. Your subject removal deadline can sometimes be extended. Talk to your REALTOR® about requesting an extension if your broker needs more time.
The Bottom Line
Conditional approval is a step in the process. It is not the end of the process.
Read your broker's emails carefully. Look for specific language. Do not assume. Confirm in writing that all conditions are satisfied before you agree to remove your financing condition.
The cost of waiting one more day for written confirmation is zero. The cost of waiving conditions prematurely can be significant.
If you have questions about how the offer process works in Kelowna, or how financing conditions are handled, reach out. That's what I'm here for.
All for now,
Michael
This blog post is for general informational purposes only. It does not constitute mortgage advice, financial advice, or legal advice. Mortgage approval processes, lender conditions, and financing requirements vary by lender, borrower, and transaction. Always consult a licensed mortgage broker or mortgage professional for advice specific to your situation. If you have questions about financing conditions in a real estate contract, consult a qualified real estate lawyer or notary public. Michael A. Jones is a licensed REALTOR® with Royal LePage Kelowna and is not a mortgage broker, financial advisor, or legal professional.