Buying a home is one of the biggest financial milestones in life. But before you get the keys to your new place, there’s one hurdle every Canadian faces: getting approved for a mortgage. If you’ve ever asked yourself questions like how to get preapproval for a mortgage, you’re in the right place to find out.
At Loanspot.ca, we help Canadians connect with trusted lenders across the country if you’re applying for your first mortgage, looking to refinance, or trying to get a better mortgage deal. While Loanspot.ca is not a lender, we make the process easier by pointing you toward financial providers that follow Canadian laws and employ fair lending practices.
In this guide, we tell everything you need to know about how to get a mortgage in Canada, like checking your credit, preparing documents, getting pre-approved, comparing lenders, and navigating the official application process. We’ll also cover what to do if your application is denied, common mistakes to avoid, and tips to boost your chances of approval.
Step 1: Strengthen Your Credit Profile
Mortgage lenders in Canada look closely at your credit history when deciding whether to approve you. Your credit score shows how well you’ve managed debt in the past, and it directly impacts the kind of interest rate you’ll qualify for.
Why Your Credit Score Matters
- A higher score can help you secure a lower interest rate.
- Poor credit may mean a higher down payment requirement.
- In some cases, a low score can lead to outright denial.
How to Improve Your Credit Before Applying
- Check your report: Order your credit report from Equifax or TransUnion and make sure there are no errors.
- Pay bills on time: Even one missed payment can lower your score.
- Lower your credit utilization: Aim to keep your credit card balances under 30% of the limit.
- Avoid new credit applications: Each inquiry can temporarily reduce your score.
With these steps, you can increase the chances of getting approved for a mortgage and may even unlock better mortgage options with lower interest rates.
Step 2: Pre-Qualification vs. Pre-Approval
Homebuyers often confuse these two terms, but they play very different roles in the mortgage process.
Pre-Qualification
- A quick estimate based on the basic financial information you provide.
- Gives you a general idea of how much you might qualify for.
- No credit check required in most cases.
- Not guaranteed by a lender.
Pre-Approval
- Requires full documentation: proof of income, assets, and debts.
- Lender performs a credit check and debt service ratio analysis.
- Locks in an interest rate for up to 120–130 days, depending on the lender.
- Signals to sellers that your offer is legitimate.
If you’re serious about buying a home, pre-approval is the step that really matters. Sellers take you more seriously, and you’ll know exactly what your budget looks like.
Step 3: Gather the Right Documents
Applying for a mortgage in Canada means being ready to show lenders a complete financial picture. Think of it as proving that you can handle the responsibility of homeownership.
Here’s what you’ll usually need:
- Government-issued identification.
- Proof of employment (pay stubs, T4 slips, or an employment letter).
- Proof of income for self-employed applicants (tax returns, financial statements).
- Bank statements showing available funds for your down payment.
- Records of any assets, such as investments or other properties.
- Details of existing debts (credit cards, loans, lines of credit).
- Information about the property you plan to buy (if applicable).
Being organized saves time. If you have these documents ready before meeting with a lender, you’ll move through the process much faster.
Understanding Debt Service Ratios (GDS & TDS)
When lenders assess your mortgage application, they don’t just look at your income and credit score. They also use something called debt service ratios to measure how much of your monthly income goes toward housing costs and overall debt.
The two most important ratios in Canada are:
1. Gross Debt Service Ratio (GDS)
This ratio shows how much of your gross monthly income goes toward housing costs. Housing costs include mortgage principal and interest, property taxes, heating costs, and 50% of condo fees (if applicable).
Most lenders want your GDS ratio to be under 32%. Here is the example:
- Gross monthly income: $6,000
- Mortgage + property tax + heating + 50% condo fee = $1,800
- GDS = $1,800 ÷ $6,000 = 30% (This is acceptable).
2. Total Debt Service Ratio (TDS)
This ratio includes all debt obligations, not just housing. In addition to mortgage and housing costs, TDS counts:
- Car loans
- Student loans
- Credit card payments
- Personal loans or lines of credit
Most lenders want your TDS ratio to be under 40–44%, depending on the institution.
Example:
- Gross monthly income: $6,000
- Housing costs = $1,800
- Other debt payments = $600
- Total = $2,400
- TDS = $2,400 ÷ $6,000 = 40% (This is right at the limit).
Even if your credit score is excellent, if your GDS or TDS exceeds lender guidelines, your mortgage could be denied. That’s why paying down debt before applying can be just as important as saving for a down payment.
Step 4: Choosing the Right Mortgage
Not all mortgages are created equal. Beyond the rate, you’ll need to make decisions about the term, the amortization period, and whether you want a fixed or variable interest rate. Each choice affects how much you’ll pay over the lifetime of the mortgage.
Imagine two buyers: one chooses a 30-year amortization with lower monthly payments, while the other opts for a 20-year amortization and pays more each month. The first buyer gets breathing room in their monthly budget, but the second ends up saving tens of thousands in interest over time.
Similarly, a fixed-rate mortgage provides stability, locking in the same payment for years. A variable-rate mortgage, however, can rise or fall depending on market conditions. Some Canadians prefer the predictability of fixed rates, while others are willing to take on a bit of risk in exchange for the possibility of paying less.
Your choice depends on your comfort level, financial stability, and long-term goals. There’s no universal “best” mortgage, only the one that best fits your situation.
Fixed vs. Variable Rates in Depth
One of the biggest decisions you’ll face is whether to go with a fixed-rate mortgage or a variable-rate mortgage. While both options can get you into your new home, the long-term outcomes may be very different.
Fixed-Rate Mortgages
- Interest rate stays the same for the entire term (e.g., 5 years).
- Predictable monthly payments.
- Offers peace of mind, especially in times of rising interest rates.
- Historically, fixed rates are slightly higher than variable rates.
Variable-Rate Mortgages
- Interest rate can rise or fall depending on the Bank of Canada’s policy rate.
- Payments may change over time, unless you have a fixed-payment variable mortgage (in which case the portion going toward interest vs. principal shifts).
- Variable rates have been cheaper over the long run, but they carry more risk.
Imagine you take out a $400,000 mortgage.
With a fixed rate of 5.25%, your monthly payment is around $2,385. That stays the same for the entire 5-year term. With a variable rate starting at 4.75%, your payment is about $2,270 — a savings of $115 per month. But if the Bank of Canada raises rates by 1%, your payment could rise to about $2,480, costing more than the fixed option.
If you value predictability, fixed is safer. If you can handle potential fluctuations and want to save money when rates are low, variable may work better.
Step 5: Compare Lenders and Get a Better Mortgage
One of the most important steps in how to get a mortgage is shopping around. Different lenders can offer very different terms, and even a small difference in rates can save you thousands.
Options for Comparing Lenders
- Big banks: Known for stability but may not always have the most competitive rates.
- Credit unions: Community-focused with more flexible requirements in some cases.
- Mortgage brokers: Licensed professionals who compare offers from multiple lenders on your behalf.
- Online lenders: Convenient and sometimes faster approval processes.
When comparing, don’t just look at the rate. Consider prepayment privileges, penalties, and customer service as well. The “best” mortgage is not always the one with the lowest interest rate.
Step 6: The Official Mortgage Application
Once you’ve found the home you want and your offer has been accepted, it’s time for the formal mortgage application. This stage feels more serious than pre-approval because the lender is making a final decision.
You’ll provide all the documents you’ve already gathered, and the lender will confirm that your financial situation hasn’t changed since pre-approval. A home appraisal will also be ordered to ensure the property’s value matches the purchase price.
It’s important to understand that pre-approval isn’t legally binding. A lender can still change the terms or deny the loan if circumstances are different than expected. For example, if your income changes or if the home you’re buying raises red flags in the appraisal, you may have to adjust your financing plan.
This step is where preparation pays off. If your finances are steady and your paperwork is in order, the process should be smooth.
Step 7: What to Do if Your Mortgage Application Is Denied
Not everyone gets approved the first time. If that happens, don’t panic — there are ways to recover.
- Find out why: Ask the lender for specific reasons your application was declined.
- Work on your credit: Pay down debt, correct report errors, or build more history.
- Increase your down payment: A larger contribution reduces the lender’s risk.
- Add a co-signer: A co-signer with strong credit can improve your approval chances.
- Explore different lenders: “B” lenders or private lenders may offer solutions, though often at higher rates.
Denial doesn’t mean the dream of homeownership is over. It simply means you may need to take a different path.
Tips to Boost Your Approval Odds
Securing mortgage approval isn’t always easy, but there are proven ways to make yourself a more attractive borrower.
- Save for a larger down payment
The more you put down, the less risky you look to lenders. It can also reduce the need for mortgage default insurance.
- Stabilize your employment
Lenders prefer to see steady income. If possible, avoid switching jobs right before applying.
- Pay off high-interest debt first
Clearing credit cards or payday loans improves your credit score and lowers your TDS ratio.
- Keep financial activity consistent
Avoid sudden large deposits or withdrawals that could confuse lenders.
- Limit new credit applications
Each inquiry lowers your score slightly, and too many can raise red flags.
- Build a relationship with your bank or credit union
Having a history with the institution can sometimes help with approval flexibility.
- Consider a co-signer
If your income or credit is borderline, a co-signer with stronger finances may tip the scales in your favor. Lenders want to see that you can handle the commitment responsibly for years to come.
Government Programs for Canadian Homebuyers
To make mortgages more accessible, Canada offers programs designed to help first-time buyers and those struggling with affordability.
- First-Time Home Buyer Incentive (FTHBI): A shared-equity program where the government contributes toward your down payment.
- Home Buyers’ Plan (HBP): Allows you to withdraw up to $35,000 from your RRSP for a down payment, tax-free.
- GST/HST New Housing Rebate: Refunds part of the GST or HST paid on a new or substantially renovated home.
For example, a young couple buying their first condo might use the HBP to boost their down payment while also applying for the FTHBI to lower monthly payments. These programs can make the difference between renting and owning.
The Role of the Down Payment in Mortgage Approval
One of the most important factors in securing a mortgage in Canada is your down payment. It not only determines the size of your loan but also affects the type of mortgage you can qualify for and whether you’ll need mortgage default insurance.
Minimum Down Payment Rules in Canada
The federal government has clear guidelines:
- For homes priced under $500,000, the minimum down payment is 5% of the purchase price.
- For homes priced between $500,000 and $999,999, you’ll need 5% on the first $500,000 and 10% on the remaining amount.
- For homes $1 million or more, the minimum is 20%, and mortgage default insurance is not available.
Why a Bigger Down Payment Helps
- Stronger application: Lenders see you as less risky because you’re borrowing less.
- Lower monthly payments: A smaller loan means reduced principal and interest payments.
- Avoiding insurance premiums: With 20% down, you can avoid paying for CMHC mortgage insurance, which can add thousands to your costs.
- More negotiating power: Sellers may prefer buyers with larger down payments, especially in competitive markets.
How to Save for a Down Payment
Building a down payment takes time, but here are strategies that work:
- Automate savings into a dedicated account.
- Use the Home Buyers’ Plan (HBP) to withdraw up to $35,000 from your RRSP.
- Explore employer homeownership programs if available.
- Cut back on discretionary expenses and direct the savings into your down payment fund.
A well-prepared down payment doesn’t just get you into a home faster — it strengthens your mortgage application and can save you money for decades to come.
Common Mistakes to Avoid
- Skipping pre-approval: Without it, you risk making an offer you can’t finance.
- Changing jobs before closing: Lenders want stability, so switching careers mid-process can derail approval.
- Ignoring closing costs: Budget for legal fees, land transfer taxes, and other expenses beyond your down payment.
- Taking on new debt: Financing a car or applying for a new credit card can affect your approval.
- Overborrowing: Just because you’re approved for a certain amount doesn’t mean you should borrow the maximum.
Frequently Asked Questions
Do I need to be pre-approved to get a mortgage?
Technically no, but pre-approval makes you a stronger buyer and helps prevent financing surprises.
How much down payment do I need?
At least 5% of the purchase price for homes under $500,000. For homes above that, the requirement increases.
Can I get a mortgage with bad credit?
Yes, but you may need a larger down payment or to work with alternative lenders.
How do you get pre-qualified for a mortgage?
Usually, by providing basic income and debt details to a lender or broker, it’s an informal estimate, not a commitment.
Final Thoughts
Getting approved for a mortgage in Canada requires preparing yourself financially, making smart decisions, and understanding the options available to you. Improving your credit score and gathering documents to choosing the right mortgage structure, and exploring government programs — all these steps play an important role.
At Loanspot.ca, we believe that finding a mortgage should not be overwhelming. Our role is to connect Canadians with trustworthy lenders who follow the rules, respect borrowers, and help you achieve your dream of homeownership responsibly.
If you’ve been asking yourself, how can I get approved for a mortgage, the answer lies in preparation, comparison, and making informed choices. With the right strategy, you’ll be in a strong position to secure financing and move into the home you’ve been dreaming about.
