How Mortgage Pre-Approvals Work in Canada

A mortgage pre-approval is one of the most important steps when buying a home in Canada. Not only does it show sellers you’re a serious buyer—it helps you understand exactly how much you can afford, what rate you qualify for, and what your monthly payments will look like.

Here’s everything Canadians need to know about how mortgage pre-approvals work.

🏦 What Is a Mortgage Pre-Approval?

A pre-approval is a lender’s written confirmation that you qualify for a specific mortgage amount at a specific rate, based on your financial information.

A Canadian mortgage pre-approval typically includes:

• 📌 Maximum mortgage amount

• 📌 Estimated monthly payments

• 📌 Mortgage term (1–5 years)

• 📌 Rate type (fixed or variable)

• 📌 Rate hold for 90–120 days

It’s not a full approval yet, but it’s the closest thing you can get before making an offer.

🔍 Why Mortgage Pre-Approvals Matter

✔ They show sellers you’re qualified

Gives you a competitive edge in busy markets.

✔ They protect you against rate increases

If rates rise tomorrow, you keep your lower held rate.

✔ They help you shop confidently

Know your price range and avoid overextending.

✔ They uncover issues early

If you need a better credit score or debt reduction, you’ll know before house hunting.

📑 What Lenders Review During Pre-Approval

Lenders in Canada evaluate several factors:

1. Income & Employment

They verify:

• Pay stubs

• T4s

• Job letters

• Tax returns (if self-employed)

2. Credit Score

Most lenders want:

• 680+ for best rates

• 600–679 for alternative lenders

• Below 600 may require B-lender programs

3. Debt Levels (GDS/TDS Ratios)

Key mortgage ratios:

• GDS ≤ 39%

• TDS ≤ 44%

These determine how much you can borrow.

4. Down Payment

Minimum down payments in Canada:

• 5% on first $500,000

• 10% on amount between $500,000–$999,999

• 20% on $1M+ homes

5. The Federal Mortgage Stress Test

Lenders must qualify you at:

• The contract rate + 2% or

• The benchmark stress test rate
  (whichever is higher)

🧾 Documents Needed for Pre-Approval

Most lenders ask for:

• Government ID

• Recent pay stubs

• Job letter

• T4s or NOAs

• Bank statements (proof of down payment)

• Credit report

• Tax returns (self-employed)

Being organized helps speed up the review.

🔄 How Long Does a Pre-Approval Take?

With a mortgage broker, pre-approvals can take:

• 24 hours for simple applications

• 2–5 days for more complex scenarios

Rate holds last 90–120 days, depending on the lender.

📌 Pre-Approval vs Pre-Qualification: What’s the Difference?

Pre-Qualification

• Quick estimate

• No document verification

• Based on self-reported info

Pre-Approval

• Full financial review

• Verified documents

• Rate hold included

• Realistic approval outcome

If you’re serious about buying, you need pre-approval, not pre-qualification.

🏡 Does a Pre-Approval Guarantee a Mortgage?

Not quite.
Final approval depends on:

• The property

• Appraisal results

• Continued employment

• Final documentation

If everything aligns, approval is typically smooth.

💡 Tips to Increase Your Pre-Approval Amount

• Improve your credit score

• Reduce credit card or line of credit balances

• Save a larger down payment

• Avoid new loans before applying

• Use a mortgage broker to compare lenders

A broker can often get you approved where banks say no.

🚀 Final Thoughts

Understanding how mortgage pre-approvals work in Canada gives you a major advantage. With the right preparation, documents, and guidance, you can secure the best rate, shop confidently, and move into your dream home faster.