Buying a home is one of the most important financial decisions you’ll ever make, and securing mortgage approval is the primary step in the journey.
Whether you are a first-time homebuyer or looking to redesign your home, understanding what lenders look for and how to improve your financial standing can boost your chances of getting approved.
In today’s competitive housing market, especially in cities like Toronto and Vancouver and even mid-sized markets like Brampton and Hamilton, being mortgage-ready is more critical than ever.
Here are seven essential tips to help you get approved for a mortgage in Canada.
1. Check and Improve Your Credit Score
Your credit score is one of the first things a lender will assess when reviewing your mortgage application. Credit scores in Canada typically range from 300 to 900. A score of 680 or above is generally considered fair and increases your chances of getting a better mortgage rate.
To check your credit score, you can explore free online tools or significant credit bureaus like Equifax or TransUnion. You do not need to worry about your lower score than you’d like. Just take these steps to improve it:
- Pay bills on time
- Keep credit card balances low
- Avoid applying for too much credit in a short period
Even a slight increase in your credit score can significantly affect the interest rate you’re offered, impacting your monthly mortgage payments and overall affordability.
2. Save for a Larger Down Payment
The bigger your down payment, the less you’ll have to borrow and the more attractive you become to lenders. The minimum down payment in Canada depends on the buying price of the house:
- For homes under $500,000 – 5%
- For the portion of the price between $500,000 and $999,999 – 10%
- For homes priced at $1 million or more – 20%
If your down payment is less than 20%, you must pay mortgage default insurance through CMHC, Sagen, or Canada Guaranty. While this can help you qualify with a smaller down payment, it also adds to your total mortgage cost.
A higher down payment reduces the size of your loan, lowers your monthly payments, and could make the difference between approval and rejection.
3. Maintain Stable Employment
Mortgage lenders in Canada value employment stability. A full-time, permanent job with a consistent income shows that you’re financially stable and can handle regular mortgage payments.
If you’re self-employed or working on a contract, you must show at least two years of financial statements or tax returns to prove your income stability. Lenders need to see that you have a reliable and steady income stream to manage a mortgage over the long term.
4. Reduce Your Existing Debt
Your debt-to-income (DTI) ratio is another key factor lenders consider. Too much-existing debt—credit card balances, car loans, student loans—could signal financial risk and limit your borrowing capacity.
To improve your DTI ratio:
- Pay down high-interest debt first
- Avoid taking out a new loan before applying for a mortgage
- Consolidate smaller loans if it helps with monthly payment management
Ideally, your total monthly debt payments—including your future mortgage—should not exceed 44% of your gross monthly income.
5. Get Pre-Approved for a Mortgage
A mortgage pre-approval isn’t just a nice-to-have—it’s a powerful tool in your home-buying journey. It gives you:
- A realistic idea of how much you can spend
- A rate hold for 60 to 120 days
- More credibility in the eyes of sellers and real estate agents
6. Shop Around for the Best Rate
Don’t settle for the first mortgage offer you come across. Researching mortgage rates can save you thousands of dollars over the life of your loan. Use online rate comparison tools, speak with mortgage brokers, or directly connect with banks and credit unions.
Even a 0.10% difference in your interest rate can affect your monthly payment and the total interest you’ll pay over 25 years. If you feel overwhelmed by the process, consider working with a mortgage broker. They can often access exclusive deals and negotiate on your behalf.
7. Planning and Sticking to a Budget
It’s easy to fall in love with a dream home that’s slightly outside your budget, but stretching your finances too thin can be risky. Use tools like the Mortgage Affordability Calculator to decide how much you can realistically afford based on your income, debt and down payment.
Remember to factor in closing costs, moving expenses, property taxes, utilities and possible renovations. Just because a lender offers you a certain amount, you don’t have to use all of it. Realizing your financial limits can help you avoid buyer’s remorse and ensure long-term comfort and stability.
Final Thoughts
Getting approved for a mortgage in Canada isn’t just about meeting the minimum requirements—it’s about presenting yourself as a responsible, low-risk borrower. Focusing on your credit health, managing your debt, saving a healthy down payment, and understanding your financial boundaries increase your chances of approval and set you up for long-term success as a homeowner.
Do you need help navigating mortgage options or figuring out the best lenders for your situation? Taking advice from a mortgage consultant or agent can make the process easy and more tailored to your unique needs.
AKAL Mortgages is the trusted mortgage broker in Mississauga, offering expert advice and personalized service to help you find the best solution for your home financing needs.