Mortgage pre-approval does not guarantee you'll receive a mortgage on a specific property. A pre-approval confirms that a lender is willing to lend you up to a certain amount based on your current financial profile — but the final mortgage is subject to the property being formally approved, your income remaining stable, and no significant changes to your debt or credit. Most pre-approved buyers do get their mortgage; the exceptions tend to involve predictable situations that buyers can avoid with proper planning. This guide covers what can go wrong between pre-approval and closing, and how to protect yourself.

Pre-approval gives you the confidence to make offers in the GTA with a financing condition — but understanding its limits prevents nasty surprises during the conditional period. See how to get mortgage pre-approval and how long pre-approval is valid for the full context.

What Pre-Approval Actually Confirms

A pre-approval commits the lender to three things, subject to conditions:

  • A maximum loan amount based on your documented income, debts, and down payment
  • A rate hold for the pre-approval period (typically 90–120 days)
  • A preliminary assessment that your credit and income profile qualifies for their lending criteria

What it does not confirm: that any specific property will be approved, that the property's value matches the purchase price, or that your financial situation will remain unchanged between pre-approval and closing.

Reasons a Mortgage Falls Through After Pre-Approval

Property Doesn't Appraise at the Purchase Price

Every lender requires an appraisal before advancing mortgage funds. The appraisal determines the property's market value as assessed by a licensed appraiser. If the appraised value comes in below the agreed purchase price — which happens in heated bidding war situations where buyers overpay — the lender will only advance funds based on the appraised value, not the contract price.

Example: You agreed to pay $1,000,000 with a 10% down payment ($100,000). The property appraises at $950,000. Your lender will advance 90% of $950,000 = $855,000 — not 90% of $1,000,000 = $900,000. The $45,000 gap is your responsibility to cover with additional cash, or the deal falls through. In multiple-offer situations where buyers waive the financing condition, this risk is entirely the buyer's.

Income Changes Before Closing

Losing your job, switching from full-time to part-time employment, taking unpaid leave, or changing from employed to self-employed between pre-approval and closing can all trigger the lender to re-underwrite or withdraw the mortgage commitment. Your lender verifies employment before advancing funds — often with a final call to your employer days before closing. A change at that point leaves you with very little time to find alternative financing.

New Debt or Credit Changes

Taking on new debt between pre-approval and closing is one of the most common reasons mortgages fall through. Financing a car, co-signing a loan, maxing out credit cards, or opening new credit accounts all affect your TDS ratio and can take you outside the qualifying threshold. What buyers often miss is that lenders often re-pull credit shortly before closing — a new debt that appeared after your original pre-approval will show up.

Property Issues That Fail Lender Standards

Not all properties qualify for all lenders' standard mortgage products. Issues that can cause a lender to decline the specific property include:

  • Condos with ongoing litigation or pending special assessments flagged in the status certificate
  • Rural properties without potable water access
  • Properties with major structural issues identified in an appraisal or inspection
  • Non-warrantable condos (buildings with high investor-to-owner ratios or commercial on the main floor in some cases)
  • Properties with a short-term rental history that doesn't fit residential mortgage criteria

Down Payment Source Issues

If your down payment funds come from a source the lender can't verify or doesn't accept — such as borrowed money without disclosure, undocumented gift funds, or recent large deposits without a paper trail — the lender may require additional documentation or refuse the advance. Documenting your down payment properly from the start avoids this scenario.

How the Financing Condition Protects You

Including a financing condition in your offer — typically 5 business days — gives you time to have the specific property formally approved by your lender before you're committed. If the lender declines the property or your formal mortgage commitment doesn't come through, you can exercise the condition and walk away with your deposit returned.

Waiving the financing condition (going firm without it) exposes you to all of the above risks. In the GTA's competitive market, buyers are sometimes pressured to waive conditions to compete. This is a meaningful risk and should only be considered with a thoroughly reviewed property, a confirmed appraisal, and a strong relationship with your lender. See what a firm offer means and the difference between a firm and conditional offer.

Searching for your next home? Browse active GTA listings on Condohill and know what you're getting into financially before you make an offer.

FAQ

Can a lender cancel a mortgage after pre-approval?

Yes. A pre-approval is conditional, not a binding commitment to advance funds on any property. A lender can decline to proceed after pre-approval if the property doesn't appraise, your income changes, new debt appears, or the property has qualifying issues. A formal mortgage commitment letter, issued after the property is approved, is a stronger signal — but even then, lenders verify employment and credit before closing.

What happens if the appraisal comes in low?

If the appraisal is below the purchase price, the lender will only advance funds based on the appraised value. You must cover the gap with additional cash (increasing your effective down payment), negotiate the purchase price down with the seller, or find a different lender whose appraiser values the property differently. If you cannot cover the gap and the seller won't reduce the price, and you have a financing condition, you can exit the deal and receive your deposit back.

Should I avoid taking on new debt before closing?

Yes. Do not finance a car, open new credit cards, take out a personal loan, or co-sign any debt between your pre-approval and your mortgage closing. Lenders re-pull credit before advancing funds, and new debt can push your TDS ratio above qualifying limits. If you need a large purchase, wait until after your mortgage funds.

Can my pre-approval be declined if I change jobs?

It depends on the job change. Moving to a higher-paying role in the same field at the same or increased salary is generally fine. Switching from employed to self-employed, taking a pay cut, moving from permanent to contract, or starting a job with a probationary period can trigger re-underwriting. Inform your mortgage broker about any job change as soon as it happens so they can advise whether it affects your qualification.