How to Qualify for a Mortgage in Canada

The Five Factors of Mortgage Qualification

Canadian lenders evaluate mortgage applications against five core factors: credit score, income, employment, down payment, and existing debt. Meeting the minimum in one area doesn’t guarantee approval if another falls short — lenders look at the full picture together.

Credit Score Requirements

Most A lenders (banks and major mortgage lenders) look for a credit score of at least 680 for the best rates, though approval is often possible with scores as low as 600–620 depending on the lender and your overall financial profile. Below that range, B lenders and alternative/private lenders become the more realistic path, typically at higher interest rates.

Tip: Check your credit report before applying. Errors are more common than people expect, and catching one before a lender does can save you from a preventable rejection or a worse rate.

Income Requirements

Lenders want to see income that’s sufficient and reliable enough to comfortably support your proposed mortgage payment alongside your other debts. Income is what feeds directly into the GDS and TDS calculations below — the higher and more stable your income relative to your debt load, the more you’re able to qualify for.

Employment Requirements

Separate from the income amount itself, lenders scrutinize the type and stability of your employment:

• Salaried employees typically need to show at least two years of consistent employment, ideally in the same field or with the same employer.
• Self-employed applicants generally need two years of documented income (often via tax returns, Notice of Assessment, and business financials), since income can vary year to year.
• Probationary periods at a new job can complicate approval — some lenders require you to be past probation, while others accept an employment letter confirming permanence.

This is one of the most commonly underestimated factors — two applicants with identical income can be treated very differently depending on how stable and verifiable their employment is.

Down Payment Requirements

Down payments under 20% require mortgage default insurance (through CMHC or a private insurer), which adds a premium to your mortgage but allows you to buy with less money down.

The Mortgage Stress Test

Since 2018, all federally regulated lenders must qualify borrowers using the mortgage stress test — you need to prove you could afford payments at a higher “qualifying rate,” not just your actual contract rate. This is meant to ensure you can still manage payments if rates rise or your circumstances change. The stress test applies to both insured (under 20% down) and uninsured (20%+ down) mortgages.

GDS and TDS: The Debt Ratios Lenders Use

Lenders use two ratios to measure affordability:

• GDS (Gross Debt Service ratio): your housing costs (mortgage payment, property tax, heating, and half of any condo fees) shouldn’t exceed roughly 39% of your gross income.
• TDS (Total Debt Service ratio): all your debt payments combined (housing costs plus car loans, credit cards, student loans, etc.) shouldn’t exceed roughly 44% of your gross income.

Definition: GDS/TDS — the two standard ratios Canadian lenders use to assess whether your income can reasonably support your total debt load, including the mortgage you’re applying for.

Getting Pre-Approved

A mortgage pre-approval gives you a clear picture of what you can afford before you start house-hunting, and shows sellers you’re a serious, qualified buyer — which can matter in a competitive market. Pre-approval typically holds your quoted rate for 90–120 days while you shop.

Warning: Pre-approval isn’t a guarantee. Final approval still depends on the specific property passing appraisal, and your financial situation staying materially the same between pre-approval and closing.

Common Reasons Buyers Don’t Qualify

• Insufficient down payment saved
• Credit score below lender minimums
• Unstable or unverifiable employment, especially for self-employed applicants
• Too much existing debt relative to income (failing TDS)
• Failing the stress test at the qualifying rate