What You Need to Qualify for a Mortgage in Canada
Getting a mortgage isnโt just โdo I have a down payment?โ Lenders run your numbers through a few specific tests, and knowing them ahead of time tells you what you can afford โ and what to fix before you apply. Hereโs what qualifying in Canada actually involves.
1. The down payment
How much you must put down depends on the purchase price:
| Home price | Minimum down payment |
|---|---|
| Up to $500,000 | 5% |
| $500,000 โ $1.5 million | 5% on the first $500k, 10% on the rest |
| $1.5 million and up | 20% |
If your down payment is less than 20%, youโre required to buy mortgage default insurance (from CMHC or a private insurer). It protects the lender, not you, and the premium is added to your mortgage โ so a smaller down payment means a bigger loan and an insurance cost. The mortgage calculator factors this in.
2. The stress test
Even if todayโs payment fits your budget, lenders must check you could handle a higher rate. You have to qualify at the greater of your contract rate + 2% or 5.25%. So if youโre offered 4.5%, you must prove you could afford payments at 6.5%.
This stress test doesnโt raise the rate you actually pay โ it just caps how much you can borrow, leaving a cushion in case rates rise by renewal. Itโs why the amount a lender approves is often lower than buyers expect.
3. Your debt-service ratios (GDS and TDS)
Lenders measure how much of your income would go to housing and debt:
- GDS (Gross Debt Service): your housing costs โ mortgage payment, property tax, heating, and half of any condo fees โ as a share of gross income. Lenders typically want this under ~39%.
- TDS (Total Debt Service): GDS plus all your other debt payments (car loans, credit cards, lines of credit, student loans). Usually capped around ~44%.
The takeaway: other debts directly shrink the mortgage you qualify for. Paying down a car loan or credit card before applying can meaningfully raise your approval โ another reason to clear high-interest debt first (see the debt payoff calculator).
4. Credit score and history
Lenders check your credit score to gauge reliability and set your rate. A strong score helps you qualify with the best lenders at the best rates; a weak or thin file can mean a higher rate or a smaller loan. If youโre new to Canada, building credit early matters for exactly this moment.
5. Stable, provable income
Lenders want to see income they can count on โ usually a couple of years of steady employment, or two-plus years of records if youโre self-employed. Theyโll ask for pay stubs, tax documents (T4s, notices of assessment), and bank statements. The more predictable and documented your income, the smoother the approval.
Get pre-approved first
A pre-approval has the lender check your finances up front and tell you the amount and rate you qualify for, usually held for a few months. Itโs worth doing before you shop, so you know your real budget and can move quickly on an offer. Just remember the approved maximum is a ceiling, not a target โ borrowing less than the max leaves breathing room.
The takeaway
- Down payment: 5% / 10% / 20% by price tier; under 20% adds mortgage insurance.
- The stress test makes you qualify at roughly 2% above your rate, capping how much you can borrow.
- Keep GDS under ~39% and TDS under ~44% โ paying off other debt raises what you qualify for.
- A solid credit score and provable income round it out; get pre-approved before you shop.
Run the payments, insurance, and renewal balance on a price youโre considering in the mortgage calculator, and brush up on the Canadian mortgage basics.
This is general education, not financial advice. Qualifying rules and thresholds change and vary by lender โ confirm current numbers before relying on them.