How to Qualify for a Mortgage in Ontario: What Lenders Look At

Mortgage Qualification Is Not a Mystery

Many people treat mortgage qualification like a black box. You hand over documents, wait a few days, and someone tells you yes or no. Knowing what lenders measure makes the process easier to plan for.

Lenders work from a set of tests: your credit history, your income, your existing debts, your down payment and the property itself. This article explains the main ones and where people most often get tripped up. The rules below reflect OSFI's minimum qualifying rate3 and CMHC's requirements for insured mortgages2 as checked on October 7, 2026. The Bank of Canada's policy rate was 2.25% after its September 2, 2026 decision.1

Credit: What Lenders Look At

Your credit history tells a lender how you have handled borrowing in the past. There is no single score that guarantees approval or a decline, because each lender and insurer sets its own policy. One published benchmark: for CMHC-insured mortgages, at least one borrower or guarantor must have a credit score of 600 or higher.2 Many lenders look for more than that, and applicants with lower scores are sometimes served by alternative or private lenders on different terms.

A few points that apply across lenders:

• Check both bureaus. Equifax and TransUnion can show different scores because they may hold different information. Lenders vary in which report they use, so review both before you apply and correct any errors.
• Balances matter. Carrying high balances against your credit limits can pull your score down, even if you pay on time. Paying revolving balances down before you apply can help.
• Patterns matter more than a single slip. A pattern of late payments, or accounts that went to collections, carries more weight than one isolated late payment, and the effect depends on the lender.
• A thin file can be a problem. If you have little or no credit history, a lender may have too little to assess. Lenders differ in how many accounts and how much history they want to see.

GDS and TDS Ratios: The Math That Sets Your Limit

Credit helps a lender decide whether to work with you. Your debt service ratios help decide how much they will lend. For CMHC-insured mortgages, the maximums are published.2

Gross Debt Service (GDS) Ratio

GDS compares your housing costs to your gross (before-tax) income. Housing costs typically include the mortgage payment (calculated at the qualifying rate, not your actual rate), property taxes, a heating allowance and, for condominiums, a share of the condo fees.

CMHC maximum GDS: 39%.2 Limits for uninsured mortgages are set by each lender and can be lower.

Total Debt Service (TDS) Ratio

TDS takes your housing costs and adds your other monthly debt obligations: car payments, student loans, credit card minimums, lines of credit, support payments and other recurring debt.

CMHC maximum TDS: 44%.2 Whichever of the two limits you reach first is the one that caps your borrowing.

What this looks like in practice

Say your household gross income is $120,000 per year, or $10,000 per month.

• GDS at 39%: housing costs cannot exceed $3,900 a month.
• TDS at 44%: housing costs plus all other debt payments cannot exceed $4,400 a month.
• With a $500 car payment and a $200 student loan payment, that leaves $3,700 a month for housing under TDS, which is lower than the $3,900 GDS allows. In this case TDS is the limit that binds.

This is why reducing other debts before you apply can raise the amount you qualify for when TDS is your limit. Once GDS becomes the limit, paying off more debt no longer adds borrowing room.

The Stress Test: How It Works

OSFI requires federally regulated lenders to qualify most new borrowers at the greater of the contract rate plus 2%, or 5.25%. This is called the minimum qualifying rate, or stress test.3 CMHC applies the same qualifying rate when calculating GDS and TDS for insured mortgages.2

The effect is that you must show you could carry the payments at a higher rate than you will actually pay. Because the qualifying payment is higher than your real payment, your maximum borrowing is lower than it would be without the test. The size of the effect depends on the rate you are offered, which varies by lender and by day, so ask your lender for the qualifying rate used on your file.

Some points worth knowing:

• It applies to new underwriting. OSFI's page describes the test as applying to most newly underwritten residential mortgage borrowers.3 If you are refinancing or increasing your loan, ask your lender how it will qualify you.
• Switching lenders at renewal can be treated differently. OSFI does not expect lenders to apply the minimum qualifying rate to an uninsured straight switch, meaning an uninsured mortgage moved between federally regulated lenders without increasing the amortization or the loan amount.3 Other situations, including insured mortgages, may be treated differently, so confirm with the new lender.
• Not every lender is federally regulated. OSFI's rule binds federally regulated lenders. Provincially regulated credit unions and private lenders set their own policies, and some apply a similar test. Ask each lender how it qualifies you.

An illustrative scenario

A couple in Hamilton earns a combined $140,000 a year ($11,667 a month), has $60,000 saved for a down payment, and has a $350 monthly car payment. Assume, for illustration only, that the qualifying rate works out to 6.00%, a 25-year amortization, and $500 a month for property tax and heating. These are assumptions, not quotes.

• GDS limit at 39%: $4,550 a month for housing costs.
• TDS limit at 44%: $5,133 a month, less the $350 car payment, leaves $4,783 for housing.
• The lower figure applies: GDS, at $4,550, is the limit here.
• Room for the mortgage payment: $4,550 less $500 for tax and heating leaves $4,050 a month at the qualifying rate.
• What that supports: at 6.00% (compounded semi-annually) over 25 years, $4,050 a month supports a total loan of roughly $633,000.
• Including the insurance premium: with $60,000 down, the loan would be above 90% of the price, so the 4.00% CMHC premium applies and is added to the loan. That points to a maximum purchase price of about $669,000.

Because GDS is the limit in this example, paying off the car loan would not by itself raise the amount they qualify for. A different household, with a lower income relative to its debts, could find the opposite. This case study is for illustrative purposes. Individual outcomes depend on specific financial circumstances, creditworthiness, and lender criteria.

Income Verification: Salaried, Self-Employed, and Everyone Else

Lenders need to confirm that the income you claim is real, stable, and likely to continue. Exactly what they ask for depends on the lender and on how you earn your income.

Salaried employees

This is the simplest case. Lenders commonly ask for:

• A recent pay stub
• An employment letter confirming your position, salary, start date, and whether the role is permanent
• Your most recent T4 and Notice of Assessment (NOA) from CRA

If you recently changed jobs, expect questions about your probation period and job history. Moving from salaried to contract or commission work can bring a different set of requirements.

Commission and bonus income

Lenders will often use commission or bonus income, but usually only with a track record, commonly averaged over a couple of years. If the trend is declining, a lender may use a lower figure. Policies vary.

Self-employed borrowers

Self-employed qualification can be more complicated, because what shows on paper can differ from what you actually take home. Lenders generally rely on the income you have declared to CRA on your tax returns, supported by your Notices of Assessment. If you write off a large share of your expenses to reduce your tax bill, your declared income may be much lower than your cash flow.

Options for self-employed borrowers with low declared income include:

• Alternative documentation programs: Some lenders will consider bank statements or financial statements in place of declared income. These programs and their terms vary by lender and are typically more expensive than conventional A-lender mortgages.
• A larger down payment: More equity in the property can give some lenders more flexibility on documentation.
• Plan ahead on taxes: If you intend to buy within a year or two, talk to your accountant about how your declared income affects your borrowing before you file.

Gig workers and non-traditional income

Freelancers and contract workers face the same verification challenge as the self-employed: lenders generally want tax returns and NOAs covering a period of history. If gig income supplements a salaried job, it may be counted, but only with documentation. Rental income from an existing property can also help, though lenders account for the property's carrying costs.

Down Payment Rules and Insured Mortgages

The size of your down payment does not only affect your monthly payment. It also changes which rules apply to the whole deal.

Minimum down payment

In Canada the minimum down payment depends on the purchase price: 5% of the first $500,000, plus 10% of the portion between $500,000 and $1.5 million, and 20% for a price of $1.5 million or more. For example, a $600,000 home requires a minimum down payment of $35,000.4

Insurance premiums and amortization

When the down payment is under 20%, the mortgage generally must be insured. CMHC's premium is a percentage of the loan, set by the loan-to-value ratio, and it can be added to the mortgage.2 The standard maximum amortization for an insured mortgage is 25 years. Since December 15, 2024, insured mortgages can have an amortization of up to 30 years for first-time home buyers and for buyers of newly built homes, and the price limit for insured mortgages is $1.5 million.5

The table shows the premium bands for homeowner purchases. CMHC lists lower premiums at loan-to-value ratios of 80% and under, which apply when a lender chooses to insure a mortgage.2 The percentages can change, so check CMHC's current schedule. On a purchase above $500,000 the minimum down payment is more than 5% of the price, as the rule above shows.

What catches buyers off guard:

• The premium is real money. On a $600,000 purchase with the $35,000 minimum down, the loan is $565,000. At 4.00%, the premium is $22,600. If it is added to the mortgage, the loan becomes $587,600 and you pay interest on the premium for the life of the mortgage.
• Ontario charges sales tax on the premium. Ontario, Manitoba and Quebec charge provincial sales tax on mortgage insurance premiums, and that tax must be paid at closing rather than added to the mortgage.4
• Source of down payment matters. Lenders ask where your funds came from. Savings, RRSP withdrawals, FHSA withdrawals, gifts from family (usually with a gift letter) and sale proceeds are commonly accepted, but rules vary by lender. An unexplained large deposit can lead to questions and delay your approval.
• Lenders can ask for more. Even with 20% down, a lender may require insurance or a larger down payment if you are self-employed or have a weak credit history.4

Common Reasons for a Decline and What Helps

Many declines come down to timing or documentation rather than something permanent. Here are the ones that come up most often.

High debt ratios

If your TDS or GDS is above the lender's limit, the two levers are higher income or lower debt. Paying down a credit card or a car loan can improve your ratios, as long as the ratio you are over is the one those debts affect.

Down payment documentation

If money appeared in your account recently without a paper trail, expect to document where it came from: bank statements, a gift letter, a sale agreement or withdrawal confirmations. Start gathering these well before you apply.

Employment gaps or recent job changes

A short gap in employment from a year ago is usually manageable with documentation. A job change just before applying is harder to explain. If you plan a career move, it can help to finalize your financing first, and many lenders look more carefully at borrowers still in a probation period.

Property issues

Not every property qualifies with every lender or insurer. Condominiums with significant legal disputes or reserve fund shortfalls, properties with environmental concerns, rural properties on well and septic, and mixed-use properties can face extra requirements or restrictions. Ask your broker before you make an offer.

Consumer proposals and bankruptcies

A consumer proposal or a bankruptcy does not permanently bar you from a mortgage. Lenders set their own waiting periods after the proposal is completed or the bankruptcy is discharged, and they usually want to see re-established credit. Alternative lenders may consider you sooner, on different terms. Ask lenders directly about their policies.