How to Get Approved for a Mortgage in Canada (2025): A Complete Guide

Here’s what we’ll cover:

• What Does Mortgage Approval Mean?

• Why Is Approval So Important in 2025?

• Step 1: Check Your Credit Score

• Step 2: Understand Your Debt Ratios (GDS & TDS)

• Step 3: Gather Income and Employment Proof

• Step 4: Know the Stress Test Rules

• Step 5: Get Pre-Approved to Show You’re Serious

• Step 6: Avoid These Common Approval Mistakes

• Real-Life Example: How Ravi Got Approved After Rejection

• Final Thoughts from a Mortgage Expert

Getting a mortgage isn’t just about finding a good rate — it’s about convincing a lender that you’re trustworthy and financially ready to handle a home loan. If you’re a first-time buyer in Canada in 2025, the approval process can feel like a mix of paperwork, numbers, and stress. But don’t worry. This guide explains exactly how to boost your chances of getting approved for a mortgage, step by step, in plain and simple language.

What Does Mortgage Approval Mean?

Mortgage approval means a lender has officially reviewed your financial details and agreed to lend you money to buy a home. They look at your credit score, income, debt, savings, and even the home you’re buying. If everything checks out, they approve your application — either with or without conditions.

Why Is Approval So Important in 2025?

In 2025, mortgage rules are tighter than ever. Lenders want proof that you can handle your monthly payments even if rates go up. With inflation still affecting affordability, banks are cautious — and that means your financial picture needs to be clean, stable, and well-documented to pass their tests.

Step 1: Check Your Credit Score

Your credit score is one of the first things lenders check. In Canada, it ranges from 300 to 900. Most lenders want to see at least **680** for a standard mortgage.

You can check your score for free using platforms like Borrowell or Credit Karma. If it’s too low, focus on paying off debt, making timely payments, and keeping credit usage low.

Step 2: Understand Your Debt Ratios (GDS & TDS)

Lenders use two key ratios to decide if you can afford a mortgage:

– **GDS (Gross Debt Service)**: This is your housing costs (mortgage, property tax, heating) divided by your income. It should be under 35%.
– **TDS (Total Debt Service)**: This includes all your monthly debt (credit cards, car loans, etc.) and should stay under 42%.

If either number is too high, you may get rejected or qualify for less. Use an online GDS/TDS calculator to check where you stand.

Step 3: Gather Income and Employment Proof

You’ll need to show that you have a steady income. Most salaried employees will need:

– Recent pay stubs
– T4 slips or NOAs (2 years)
– Letter of employment

If you’re self-employed, lenders want:

– 2 years of tax returns
– Business registration
– Financial statements

If your income is from tips, bonuses, commissions, or rental property, expect extra documentation.

Step 4: Know the Stress Test Rules

Even if you get a 5% interest rate, the lender has to test your application at a **higher rate** — typically the greater of 5.25% or your contract rate + 2%.

This ensures that if rates rise in the future, you’ll still be able to pay your mortgage. Many people fail the stress test even though they can afford the payments now.

Step 5: Get Pre-Approved to Show You’re Serious

A mortgage pre-approval is like a dress rehearsal. The lender checks your documents, pulls your credit, and gives you a written letter stating how much they’ll lend.

This makes your home offers stronger, sets your budget, and protects you from rate hikes while you shop. It’s not a guarantee — but it’s the next best thing.

Step 6: Avoid These Common Approval Mistakes

Even strong applicants can get denied if they make these missteps:

– Switching jobs right before applying
– Financing a car or racking up credit card debt
– Depositing large, unexplained amounts in your account
– Forgetting to disclose existing loans or obligations

Lenders want to see **stability**, not sudden changes. If in doubt, speak to a broker before making any financial moves during your approval window.

Real-Life Example: How Ravi Got Approved After Rejection

Ravi applied for a mortgage in Mississauga and got turned down — his TDS was 47%, and he had a recent car loan.

Instead of giving up, he worked with a broker who helped him:
– Pay off one credit card
– Move his car loan under his spouse’s name (who wasn’t on the mortgage)
– Reapply with a credit union instead of a bank

He was approved a month later — and bought his first home within six weeks.

Final Thoughts from a Mortgage Expert