Getting a mortgage isn't just about finding the best rate—it's about positioning yourself to get approved with favorable terms. The stronger your application, the better your chances of approval and the more negotiating power you'll have on rate and conditions.
As a mortgage agent, I see applications every day. Some sail through underwriting; others struggle. The difference often comes down to preparation. Here are five things you can do before you apply to put your best foot forward.
1. Optimize Your Credit Score
Your credit score is one of the first things lenders look at. In Canada, most lenders want to see a minimum score of 680 for their best rates, though some will work with scores as low as 600 (with higher rates or additional conditions).
Quick Credit Score Boosters
If you have a few months before you plan to apply, here are proven ways to improve your score:
- Pay down credit card balances. Your credit utilization ratio (how much of your available credit you're using) has a significant impact. Aim to use less than 30% of your available credit—ideally less than 10%.
- Make all payments on time. Even one missed payment can drop your score. Set up automatic payments for at least the minimum amounts.
- Don't close old credit cards. The length of your credit history matters. Keep your oldest accounts open and active.
- Avoid new credit applications. Each hard inquiry can temporarily lower your score. Hold off on new credit cards, car loans, or other financing until after your mortgage closes.
- Check for errors. Get your credit report from Equifax and TransUnion and dispute any inaccuracies.
How Long Does It Take?
Credit score improvements typically take 2-6 months to show up, depending on what you're fixing. If you have significant credit issues, start this process as early as possible.
2. Manage Your Debt-to-Income Ratios
Lenders use two key ratios to assess your ability to carry a mortgage:
- Gross Debt Service (GDS) ratio: Your housing costs (mortgage, property taxes, heating, and 50% of condo fees if applicable) as a percentage of your gross income. Most lenders cap this at 39%.
- Total Debt Service (TDS) ratio: Your housing costs plus all other debt payments as a percentage of gross income. Most lenders cap this at 44%.
How to Improve Your Ratios
- Pay down existing debt. Every $100/month in debt payments you eliminate increases your borrowing capacity by roughly $20,000.
- Consolidate high-interest debt. If you have multiple debts, consolidating them could lower your monthly payments.
- Avoid taking on new debt. That new car can wait until after you close on your home.
- Consider a co-borrower. Adding a spouse or partner's income can help if your solo ratios are tight.
Use my affordability calculator to estimate how much you can borrow based on your income and existing debts.
3. Demonstrate Stable Employment
Lenders want to see that you have reliable income to make your mortgage payments. Here's what they look for:
For Salaried Employees
- Time in current job: Ideally at least 3-6 months, though many lenders are flexible if you're in the same industry.
- Stability in the industry: Job-hoppers may face more scrutiny, especially if moves aren't clearly upward.
- Probationary periods: Many lenders will consider you even if you're on probation, especially with a strong overall profile.
For Commission or Variable Income
- Lenders typically want 2 years of history to average your income.
- Recent income matters more. If your income is trending up, that's viewed favorably.
- Bonus income is often included if you have a 2-year history.
For Self-Employed Applicants
Self-employed applicants face unique challenges. Read my guide on getting a mortgage when you're self-employed for detailed strategies, or visit my self-employed mortgages service page.
Timing Your Application
If you're about to change jobs, consider:
- Getting pre-approved before you leave your current job
- Waiting until you're out of probation at the new job
- Securing a written job offer if you're moving to a higher-paying position
4. Prepare Your Documents in Advance
Nothing slows down a mortgage application like missing documents. Having everything ready shows lenders you're organized and speeds up your approval.
Key Documents to Gather
- Government ID: Driver's license or passport
- Proof of income: Recent pay stubs, letter of employment, T4s, NOAs (Notice of Assessment from CRA)
- Proof of down payment: 90 days of bank statements showing your savings
- Debt statements: Current balances and payments for all debts
For a complete checklist tailored to your situation, see my Mortgage Document Checklist.
The 90-Day Rule
Lenders want to see your down payment "seasoned" in your account—meaning it's been sitting there for at least 90 days. This proves the money is genuinely yours and wasn't borrowed.
If you're transferring money from another account or receiving a gift from family, do this at least 90 days before you plan to apply, and keep records of the transfer.
5. Solidify Your Down Payment Strategy
Your down payment affects your mortgage in several ways: how much you can borrow, whether you need mortgage default insurance, and how lenders perceive your risk level.
Down Payment Requirements in Canada
- Under $500,000: Minimum 5% down payment
- $500,000 to $999,999: 5% on first $500,000, 10% on the remainder
- $1 million and above: Minimum 20% down payment
Acceptable Sources
Lenders need to verify where your down payment comes from. Acceptable sources include:
- Savings: Money you've accumulated over time (with 90 days of bank statements)
- Gifts: From immediate family, with a gift letter stating the money is not a loan
- RRSP Home Buyers' Plan: Up to $35,000 tax-free from your RRSP (must be repaid over 15 years)
- FHSA (First Home Savings Account): Tax-free savings specifically for your first home
- Sale of another property: Equity from a previous home
Why More Is Better
While you can buy with as little as 5% down, a larger down payment offers advantages:
- Lower mortgage insurance: CMHC premiums decrease as your down payment increases.
- Lower monthly payments: You're borrowing less, so you pay less each month.
- Stronger application: A larger down payment signals financial stability to lenders.
- More equity cushion: You're better protected if property values decline.
Use my CMHC insurance calculator to see how your down payment affects insurance costs.
Bonus: Get Pre-Approved Early
One of the best things you can do is get pre-approved before you start house hunting. This gives you:
- A clear budget: You'll know exactly what you can afford.
- Negotiating power: Sellers take pre-approved buyers more seriously.
- Time to address issues: If there are problems with your application, you'll discover them early.
- Rate protection: Most pre-approvals lock in your rate for 90-120 days.
Ready to Get Started?
Strengthening your mortgage application doesn't have to be complicated. Start with these five areas, and you'll be in a much stronger position when it's time to apply.
If you're a first-time home buyer, I highly recommend reading my comprehensive First-Time Home Buyer's Guide for even more detailed guidance.
Ready to see where you stand? Start your application or book a consultation to review your situation together.