Pre-Approval & Qualifying

Lenders use two ratios: GDS (housing costs ÷ gross income, max ~39%) and TDS (all debts ÷ gross income, max ~44%). A car payment of $500/month can reduce your qualifying amount by $80K–$100K. The stress test further reduces what you can borrow because lenders qualify you at a rate higher than what you'll actually pay.

These ratios are calculated at the stress test rate, not your actual rate — so the qualifying payment is higher than what you'll actually pay. Insured mortgages (under 20% down) have slightly stricter ratio limits with some lenders. Uninsured can sometimes flex to 42%/47% with strong files. Every lender weighs this differently — a broker knows which ones are more flexible.

Lenders look at the monthly PAYMENT, not the remaining balance. Even if you owe $3,000 on a car with payments of $400/month, that $400 eats into your debt ratio. In some cases, paying off the car before applying (if the balance is small) can unlock significantly more mortgage room. A lease is treated the same way as a loan payment.

A $30,000 student loan with a $350/month payment reduces your mortgage qualification by roughly $55K–$70K. If you're on the Repayment Assistance Plan (RAP) with $0 payments, some lenders accept that — others impute a payment anyway. This is exactly the kind of situation where the right broker makes the difference between approval and denial.

For support you pay: lenders add it to your monthly debt obligations in the TDS calculation. For support you receive: most lenders want to see it documented in a legal agreement and deposited consistently for at least 6–12 months. Child Tax Benefit (CCB) is a separate government payment — some lenders count it as income (typically 50–100%), others don't.

You'll need: 2 years of T4s showing the additional income, a letter from your employer confirming the income is likely to continue, and sometimes recent pay stubs showing year-to-date figures. If you've only had one year of bonuses, some lenders will use 50% of the amount. This is where broker expertise matters — lender policies on variable income differ significantly.

Your employer letter should confirm: your position, full salary, guaranteed return date, and that your employment is in good standing. If you're not returning (career change, extended leave), the calculation changes. Lenders vary widely on this — some are very flexible, others won't touch it. A broker routes you to the right one.

Co-signers typically need to be on title (co-borrower) or sign as a guarantor. Either way, the full mortgage payment appears on their credit report and reduces what THEY can borrow for their own needs. Make sure the co-signer understands this isn't just a signature — it's a full financial obligation. Parents co-signing for adult children is the most common scenario.

The rule of thumb: eliminate debts with high PAYMENTS relative to their balance. A $3,000 credit card with a $200/month minimum payment is an easy win. A $200/month car payment with $1,500 left — pay it off. But don't deplete your down payment or emergency fund to eliminate low-balance debts. Shawn runs both scenarios every time.

The employment letter must be on company letterhead and include: your name, position, salary, employment type (permanent/contract), and start date. If you get paid differently (hourly, commission, tips), the letter should break down guaranteed vs variable income. Some lenders now verify employment directly by calling your employer or using third-party verification services.

Acceptable sources: savings, RRSP/FHSA, TFSA, investment accounts, gifted funds (with gift letter), proceeds from sale of property. Unacceptable: borrowed funds from an undisclosed source, cash deposits without explanation, cryptocurrency (most lenders won't accept crypto — it must be converted and seasoned in a bank account for 90 days). Any large deposits in the 90-day period need a paper trail.

A single mortgage inquiry drops your score 5–10 points temporarily. Multiple mortgage inquiries clustered together are treated as rate-shopping (fine). But 6+ inquiries across different products in 6 months is a red flag. Some B-lenders care less about inquiry volume than A-lenders do. If your credit report is busy, a broker can strategize which lenders to approach and in what order.

The lender orders the appraisal — you don't get to pick the appraiser. If the appraisal comes in lower than the purchase price, the lender bases the mortgage on the LOWER value. This can create a shortfall you need to cover with additional cash. It's rare in stable markets but happens more in rapidly rising or cooling markets.

A home inspection covers: structure, roof, foundation, electrical, plumbing, HVAC, insulation, grading, and visible defects. It does NOT cover: hidden issues behind walls, well water quality (separate test), septic function (separate test), or environmental hazards (radon, mould behind walls). In competitive markets, some buyers waive inspections to strengthen their offer — this is risky and not recommended.

The rate hold is the most valuable part — if rates rise during your shopping period, you're protected at the lower pre-approved rate. If rates DROP, you get the lower rate automatically (your pre-approval rate is a ceiling, not a floor). If your pre-approval expires, it doesn't hurt your credit to get a new one.

An offer without pre-approval should always include a "subject to financing" condition — giving you a window (usually 5–10 business days) to secure mortgage approval. In a competitive market, sellers prefer unconditional offers, which puts you at a disadvantage. The smart move: get pre-approved first, then shop with confidence.

The key factor: is the employment in the same field as your previous job? A nurse moving to a new hospital is very different from someone switching from accounting to sales. Same-field moves with a short probation period are easier to approve. If you're in a completely new career, most lenders want to see you past probation with a confirmed permanent letter.

Without a realtor, you'll want a lawyer involved early to review the purchase agreement. An appraisal is almost guaranteed on a private sale. Make sure the purchase price is at market value — lenders won't finance a property they believe is overpriced. Also ensure you still get a home inspection, title search, and RPR review.

CCB is a government benefit tied to your income and number of children — it can be substantial ($500–$1,200+/month). Lenders that accept it typically count it for 3–5 years and may want proof of receipt (bank statements showing deposits). Since CCB decreases as income rises, lenders may use a conservative estimate. This is one of those details that separates a good broker from a bad one.

Conditional approval is the normal step between application and final approval. You're not fully approved until ALL conditions are met ("conditions cleared" or "full approval"). Don't panic about conditions — they're standard. DO respond quickly with whatever documents are requested. Delays in clearing conditions can jeopardize your closing date. Your broker handles most of this coordination for you.