How to Qualify for a Mortgage in Canada: Documents, Income & Credit Score
You found a home you love. The price feels right. Then one question stops you: will a lender actually say yes?
Here is something most people don’t know. Many first time home buyers in Surrey get delayed or turned down, not because they can’t afford a home, but because they didn’t know what lenders check first. One missing salary slip or a credit card that is nearly full can hold up your loan for weeks.
The good news is that getting approved gets much easier once you know the rules. In this guide, our mortgage broker in vancouver explains how to qualify for a mortgage in Canada in plain words. You’ll learn the income you need, the credit score that helps and the documents to gather.
What Do Lenders Check Before Approving a Mortgage?
Think of a lender as someone asking, “Will this person pay us back on time?” The answer comes down to four key factors:
What They Check | What Lenders Want to See | Quick Fix If You Fall Short |
Income | Steady job, housing costs under 39% of income, total debts under 44% | Add a co-borrower or pay off debts. |
Credit score | 600 or higher (680+ gets better rates) | Pay bills on time, lower card balances. |
Down payment | 5% to 20%, based on home price | Use the FHSA or Home Buyers’ Plan. |
The property | Worth what you’re paying, in good shape | Avoid tiny condos and major fixer-uppers. |
Let’s go through each one.
How Much Income Do You Need to Qualify?
There is no magic salary number. Lenders use two simple ratios instead.
- GDS (Gross Debt Service): the share of your income that goes to housing costs. That means mortgage payments, property tax and heating. The limit is usually 39%.
- TDS (Total Debt Service): the same housing costs plus your other debts, like car loans, student loans and credit cards. The limit is usually 44%.
Quick example: Say your household earns $120,000 a year. That is $10,000 a month before tax. At 39%, your housing costs should stay under about $3,900. At 44%, your housing costs plus all debts should stay under about $4,400.
A lower ratio always helps. If your numbers are tight, you can add a co-borrower, choose a lower-priced home, save a larger down payment or pay down a few debts first.
What Counts as Income?
Lenders accept many kinds of income:
- Salary or hourly pay
- Commission and bonuses (usually averaged over two years)
- Self-employment income
- Rental income, pension and government benefits
Self-employed? You can still get a mortgage. You will just need a bit more paperwork, like two years of tax returns.
What Is the Mortgage Stress Test?
Banks need to ensure you can manage your payments even if interest rates increase. This process is called the mortgage stress test.
You must qualify at a higher interest rate than the rate you’ll actually pay. That rate is either your contract rate plus 2% or the government’s minimum qualifying rate (currently 5.25%), whichever is higher.
The test can feel strict, but it protects you from taking on too much. Getting pre-approved early gives you a realistic picture of your budget, so you know what homes are within your reach.
What Credit Score Do You Need for a Mortgage?
Canadian credit scores run from 300 to 900. Above 760 is excellent. Below 600 makes things harder.
Your credit score can help determine which lenders you may qualify with:
Lender Type | Typical Credit Score | Cost of Borrowing |
Big banks and credit unions | 680+ | Lowest rates |
Alternative (B) lenders | 600+ | Medium rates and fees |
550+ | Highest rates and fees |
A lower score doesn’t mean “no”. This often means working with a different lender at a higher rate. As your credit improves, you may be able to switch to a traditional bank for better terms.
Simple ways to boost your score:
- Pay every bill on time. This matters most.
- Use less than 30% of your credit card limit.
- Don’t open new cards or loans right before applying.
- Check your credit report and correct any errors.
- Keep old accounts open. A longer history helps.
How Much Down Payment Do You Need?
The minimum down payment for a home depends on its purchase price:
- Under $500,000: 5%
- 500,000–1.5 million: 5% on the first $500,000, then 10% on the amount above $500,000.
- Over $1.5 million: 20%
If your down payment is less than 20%, you’ll generally need mortgage default insurance, with the premium added to your mortgage. Since many Surrey homes are priced above $500,000, understanding the down payment rules early can help you plan your budget. Buying a rental property? You’ll generally need at least 20% down.
Helpful Savings Tools for First-Time Buyers:
- FHSA (First Home Savings Account): save up to $8,000 a year, $40,000 in total and get tax breaks
- Home Buyers’ Plan: borrow up to $60,000 from your RRSP tax-free
- Gifts from close family: allowed with a signed gift letter
One more thing. Lenders base your loan on the home’s appraised value, not the price you agreed to pay. If the home appraises lower, you must cover the gap from your own savings.
Documents Needed for a Mortgage in Canada
Having your papers ready can save days. Here is your checklist:
Identity
- Two pieces of government photo ID
- PR card or work permit, if applicable
Proof of Income
- Employment letter (dated within 30 days)
- Two or three recent pay stubs
- T4 slips and Notices of Assessment for the last two years
- Self-employed: T1 Generals, plus 6 to 12 months of business bank statements
Down Payment and Debts
- 90 days of bank statements
- Gift letter, if someone is helping you
- Statements for loans, cards and lines of credit
Property (After Your Offer is Accepted)
- Purchase agreement
- Strata documents for condos and townhomes
Mistakes That Can Sink an Approval
- Changing jobs before your mortgage closes
- Buying a car or opening new credit mid-process
- Moving large, unexplained amounts between bank accounts
- Applying with many lenders at once, which can hurt your score
- Skipping pre-approval
Conclusion
Your Home Doesn’t Have to Stay a “Someday” Plan. Most people don’t wait to buy a home because they can’t afford one. They wait because the process feels like a locked door and nobody has shown them where the key is.
Here’s what we see all the time. A buyer thinks their credit is “too low”, so they put off applying for two years. Another assumes being self-employed means an automatic no. Then they sit down with someone who reads their numbers properly and it turns out they were closer than they thought.
So don’t decide you’re not ready by guessing. Find out for sure. It takes one conversation to learn what you can borrow, what to fix and how long it might take.
At Alpha Mortgage Housing Corporation in Surrey, that first chat is free. Bring your questions, even the ones you think are silly and we’ll help you work out the next step.
FAQs
Most banks prefer 680 or higher. Some lenders approve scores from 600 and private lenders may go lower. A higher score means a lower rate.
It's 5% on homes up to $500,000. For homes between $500,000 and $1.5 million, it's 5% on the first $500,000 and 10% on the rest. Homes above $1.5 million need 20%.
It depends on your debts and the home price. Lenders want housing costs under 39% of your income and total debts under 44%.
You'll need ID, an employment letter, pay stubs, T4s, Notices of Assessment, 90 days of bank statements and details of any debts.
Yes. Expect to show two to three years of tax returns and some business bank statements. Rates can be slightly higher.
A pre-approval can take one to three days with complete documents. Final approval, after your offer is accepted, usually takes a few days to a week.
Often, yes. Alternative and private lenders work with lower scores, though costs are higher. Many people improve their credit, then move to a bank at renewal.
Alpha Mortgage House Corporation is a Mortgage Broker in Surrey, BC. We provide mortgages for Home Purchases, Project financing, Second mortgages, Commercial mortgages, Mortgages for first-time home buyers and more. Alpha Mortgage is a one-stop solution for all your mortgage needs. Our team works with top lenders to provide you with the best financial options.
