There is a difference.
Once you go down the road of home ownership, it is important to know the lingo. You have probably heard that it is a good idea to get pre approved or pre qualified. There is a fundamental difference between the two.
Pre Qualified – A mortgage professional (or a banker, tehe) will take down some information about your income versus your debt, do a calculation and give you a purchase price that they think you should stay under. Presuming that they have some skill, experience and know-how, this could be helpful.
Pre Approved – A real mortgage professional will take your personal information such as your name, date of birth, address and social insurance number. They will also collect some information about your income and the debts that you currently have. At that point they will complete an application and send it off to a lender to get a formal pre approval.
As you can see, the main difference is in the credit bureau and the adjudication process. With a pre approval, you will have your deal pre-screened by an underwriter to reduce the chance of any possible hiccups going forward. Please note that if you are putting down less than 20% then your application will still have to be approved by a default insurance company such as CMHC, Genworth or Canada Guaranty.
In addition to the adjudication process, the pre approval can save a fixed rate for you for up to 120 days (for most lenders). This can help hedge against rising interest rates. As a note, you will be pre approved based on a 5yr fixed rate. That rate is held for up to 120 days. If the fixed rates go up, you still get to pay the lower rate. If the rates go down, you get an opportunity to take advantage of the lower rates. It is a win-win.
So if you are looking for your first house or thinking of moving, get pre approved. You might just save yourself a lot of money.