Most buyers arrive with a number in their head and no idea where it came from. Here is what the number actually rests on.
Pre-qualification is not pre-approval
Pre-qualification
A conversation. You tell a lender your income and debts, they run the arithmetic and give you a figure. Nothing is verified and nothing is held. Useful for orientation, worth nothing in an offer.
Pre-approval
You submit documents, the lender reviews them, and they hold a rate for a set period, commonly 90 to 120 days. Much stronger, and still not a commitment to fund any particular purchase.
The stress test
Every federally regulated lender must qualify you at the higher of your contract rate plus two per cent, or 5.25 per cent. With five-year fixed rates in the low four per cent range, the operative qualifying rate is currently around six per cent. You are approved for a payment you are not actually making, which is the point.
Your ratios are then measured at that qualifying rate:
GDS, gross debt service: mortgage payment, property tax, heat, and half of any condo fee, as a share of gross income. Lenders generally look for 39 per cent or less.
TDS, total debt service: all of the above plus car payments, lines of credit, student loans, and credit card minimums. Generally 44 per cent or less.
Lenders count a payment on your available credit whether or not you have drawn on it. An unused $50,000 line of credit can reduce what you qualify for by a six-figure sum. If you have credit you do not use, closing it before you apply is often worth more than saving another $10,000.
What a lender actually verifies
- Income: recent pay stubs, a letter of employment, and usually two years of T4s or Notices of Assessment. Self-employed applicants need two years of returns and financial statements.
- Down payment: 90 days of account history, because lenders must satisfy themselves the money is yours and not borrowed.
- Credit: score and pattern, plus every obligation on your report.
- The property itself, once you have one, including an appraisal.
Down payment rules
Five per cent on the first $500,000.
Ten per cent on the portion between $500,000 and $1,500,000.
Twenty per cent above $1,500,000, where mortgage default insurance is not available at all.
Under twenty per cent down, mortgage default insurance is mandatory and the premium is added to your mortgage. It runs roughly four per cent of the loan at five per cent down, falling as your down payment rises, with a small surcharge for a thirty-year amortisation.
A pre-approval underwrites you. It does not underwrite the property, and final approval always depends on the specific home: the appraisal, the condition, and for a condominium, the corporation's finances. Lenders also re-check your credit and employment before funding. Do not change jobs, buy a car, or open a credit card between acceptance and closing. People do, and deals collapse over it.
This is exactly what the financing condition in your offer protects. See Common Clauses.
Qualifying rules, insurance premiums and down payment thresholds all change. These figures were checked in July 2026. Your mortgage broker or lender is the authority, not this page.