Getting pre-approved for your mortgage online
By Andre Mayer • Bankrate.com

Twenty years ago, going to the bank to ask for a mortgage meant having to a don a suit and tie. Society has relaxed its sartorial standards, but asking for a bank loan can still be a formal and daunting procedure. You're still begging for the bank's kindness and mercy in the hope that it'll lend you a whopping sum of money.

This intense scrutiny has prompted some would-be homeowners to seek a pre-approved mortgage online. A pre-approved mortgage is a promissory quote from a financial institution that it will lend you a certain sum of money at a certain interest rate.

Pre-approval allows you to suss out the housing market knowing which homes you can and can't afford to bid on. The loan is generally guaranteed for between 60 and 120 days.

There is no shortage of lenders on the Internet. Type the words "mortgage" and "online" into any search engine, and the results will keep you occupied for days. It's impossible to vouch for the integrity of all lenders, but you should probably stay away from any site with a name that sounds like they should be selling pizza rather than financial products.

If you're determined to get a quote online, make sure it's from a respectable bank or financial institution.

It's all about convenience
If you go to the site of any of the major Canadian banks, the application process takes about 20 minutes. They hit you up for information on your earnings, assets, employment history and sundry other items that will corroborate your financial reliability.

Based on your earnings and down payment, the computer application will calculate what size mortgage the bank will grant you, and at what rate. (So far, no Canadian bank has ventured so far as to process the entire mortgage transaction online. The reason is simple: Signing up for any loan requires a real, live signature.)

Getting online pre-approval for a mortgage, like most modern amenities, has inherent advantages. For one, you don't have to deal with a flinty mortgage consultant. Second, you can do it from the comfort of home (in your skivvies, if you like). Finally, it gives you a swift indication of how much house you can afford.

"It's the convenience factor, of being able to do it 24/7, of not having to go in and make an appointment to talk to somebody," says Gillian Riley, vice president of mortgages at Scotiabank.

Don't expect a discount
Shopping for a mortgage online also has its disadvantages. If you read the fine print of any online mortgage application, it explains that the bank will pass your financial information on to a third party such as a credit bureau. So don't think that you can get pre-approvals from more than one bank and the others won't find out about it -- they will and your credit rating will suffer for it.

Furthermore, because many retail stores grant discounts for buying from their online equivalent, some people have the false impression that shopping for a mortgage online will automatically get them a better interest rate than applying in person. In fact, the opposite is often true.

"What you'd like to be able to do is negotiate your rate, and get a better rate. When you're online, you're not dealing with somebody [in person], so that kind of negotiation can't generally happen," says Susan Murray, director of public affairs and consumer education at the Financial Consumer Agency of Canada.

Nancy Mitchell, manager of mortgages at the Royal Bank, says it's possible to get a lower interest rate by seeing a mortgage consultant in person. "Obviously, [the rate] is open for discussion or negotiation."

Murray suggests that aspiring homeowners visit a number of bank sites in order to get an idea of the interest rates that are available to them. "Our message is always to shop around," she says. Or, you can save yourself the leg work and find all the banks' current rates in one place at Bankrate Canada's mortgage home page.

While online pre-approvals are gaining popularity, they still only represent a fraction of mortgage applications. Riley estimates that on a monthly basis, about five percent of Scotiabank's pre-approved mortgage applications originate from the Web site.

The Royal Bank has had similar findings. "Generally, the volumes of people going online [to get a pre-approval] are not very great for the actual application process," says Mitchell. "What we find is a lot of consumers still prefer to speak to someone, [even if] it's via telephone with a follow-up face-to-face interview."

Riley concurs, adding that a mortgage is simply too important a matter to leave in the hands of a computer program. "We feel rather strongly that once you're into the conversation about the actual transaction of the mortgage, that it's really a face-to-face discussion with the customer," she says. "It's one of the biggest purchases you can make, so you want to spend a bit of time talking through the various options."

Andre Mayer is a freelance writer in Toronto.