How to Get a Mortgage in Canada: A Step-by-Step Guide

Step 1: Check Your Credit Score and Report

Your credit history is one of the first things a lender will review when you apply for a mortgage. Before you start shopping for a home, it’s wise to check your credit report and credit score. This lets you confirm there are no errors that could hurt your application.

In Canada, lenders look at your credit report to assess your reliability as a borrower. If you find mistakes, you can dispute them with the credit bureau. A clean and accurate report improves your chances of approval.

Sources: Government of Canada – Financial Consumer Agency of Canada

Step 2: Save for a Down Payment

You’ll need to save for a down payment before you apply for a mortgage. The amount you save affects the size of your mortgage and your monthly payments. In Canada, lenders also look at your total housing costs relative to your income.

Your housing costs—including mortgage payments, property taxes, and heating—should generally not exceed 39% of your gross household income. This is called the Gross Debt Service (GDS) ratio. Your total debt load, which includes housing costs plus other debts like car loans or credit cards, should not exceed 44% of your gross income (Total Debt Service, or TDS, ratio).

Additionally, you’ll need to budget for closing costs. These typically range from 1.5% to 4% of the purchase price and may include home inspection fees, legal fees, property tax adjustments, and title insurance.

Sources: Government of Canada – Financial Consumer Agency of Canada

Step 3: Gather Required Documents

Once you’re ready to apply, you’ll need to provide certain documents to your lender. The exact list may vary, but most lenders require: personal identification, proof of employment, proof of income, proof of your down payment and closing costs, information about your assets and debts, and consent to a credit check.

1. Personal identification (e.g., driver’s licence, passport)
2. Proof of employment (e.g., letter of employment, recent pay stubs)
3. Proof of income (e.g., tax returns, Notice of Assessment, T4s)
4. Proof of down payment and closing costs (e.g., bank statements, gift letter if applicable)
5. Information about your assets and debts (e.g., investment statements, loan statements)

Sources: Government of Canada – Financial Consumer Agency of Canada, NerdWallet Canada, Square One Insurance Services

Step 4: Get a Mortgage Pre-Approval

A pre-approval is an important step before you make an offer on a home. It gives you an idea of how much you can borrow and shows sellers that you’re a serious buyer. To get pre-approved, you’ll submit an application with the documents listed above, and the lender will check your credit and verify your finances.

Pre-approval is not a guarantee of final approval. The lender may still refuse your mortgage after you’ve found a property and they re-assess your finances or the property itself. The pre-approved rate is typically locked in for a certain period—for example, at one major bank, the rate is locked for 120 days. In general, pre-approvals are valid for 90 to 120 days.

You may be able to get a pre-approval online, which often uses a soft credit check that does not affect your credit score. However, be sure to ask your lender what kind of check they perform.

Sources: Government of Canada – Financial Consumer Agency of Canada, Square One Insurance Services, Royal Bank of Canada

Step 5: Apply for Final Mortgage Approval

After your offer on a home is accepted, you’ll move to final mortgage approval. The lender will review the property and re-assess your financial situation. This stage typically takes one to three weeks, but the whole closing process may span 30 to 60 days.

During final approval, the lender will also ensure you meet the federal stress test requirement. If you’re dealing with a federally regulated lender like a bank, you’ll need to prove you can afford payments at a qualifying rate that is typically higher than your contract rate. This is part of Canada’s mortgage rules.

Your lender has obligations to disclose key information clearly. They must provide you with details about rates, costs, and terms in the mortgage application and agreement. If you’re renewing your mortgage, the lender must give you renewal information at least 21 days before the end of your term.

Sources: Government of Canada – Financial Consumer Agency of Canada, Royal Bank of Canada