You found the home. You love the neighbourhood. You’ve done the math. And then — the mortgage application comes back with problems.
It happens more often than people expect, and usually not for dramatic reasons. Most mortgage hiccups come down to a handful of very common, very fixable issues. The good news? If you know what lenders are looking for, you can get ahead of them before you ever submit an application.
Here are the five most common things that hurt mortgage approvals in Canada — and exactly what you can do to fix each one.
1. A Credit Score That’s Lower Than You Think
Your credit score is one of the first things a lender looks at, and many Canadians are surprised to find their score isn’t where they assumed it was. A score below 680 can limit your options, and below 600, most traditional lenders will decline outright.
What hurts your score most: missed or late payments, maxed-out credit cards, too many credit applications in a short window, and old collections you forgot about.
How to fix it: Pull your credit report through Equifax or TransUnion — you’re entitled to a free copy — and look for errors. Pay down revolving balances to below 30–35% of your limit. Avoid applying for new credit in the 3–6 months before your mortgage application. If your score needs serious work, give yourself 6–12 months of consistent, on-time payments before applying.
2. Too Much Existing Debt
Even if you’re earning a solid income, carrying a lot of debt can kill a mortgage application. Lenders use something called the Total Debt Service (TDS) ratio — the percentage of your gross monthly income that goes toward all debt payments, including the mortgage you’re applying for. Most lenders want to see this below 44%.
Car loans, student debt, lines of credit, and credit card balances all count. A hefty car payment alone can meaningfully reduce the mortgage you qualify for.
How to fix it: Before applying, pay off or pay down high-balance accounts, starting with those that carry the highest monthly payments (not just the highest interest rates). Even eliminating one smaller debt can make a noticeable difference in what you qualify for.
3. Employment or Income That’s Hard to Verify
Lenders want to see stable, documentable income. If you’re salaried with a long tenure at one employer, this is easy. But if you’re self-employed, a contractor, recently changed jobs, or in a commission-based role, income verification gets more complicated — and some lenders simply aren’t set up to handle it.
How to fix it: If you’re self-employed, lenders typically want two years of Notice of Assessments (NOAs) and T1 Generals showing consistent or growing income. Avoid writing off everything — aggressive deductions lower your stated income, which directly reduces what you qualify for.
If you recently switched jobs, a letter from your employer confirming your position, salary, and tenure can go a long way. Changing careers or going from salaried to contract just before applying is one of the riskiest moves you can make timing-wise.
A mortgage broker can also help you identify lenders who specialize in non-traditional income — this is one of the biggest advantages of working with a broker versus going directly to a single bank.
4. Not Enough of a Down Payment (or the Wrong Source)
The minimum down payment in Canada is 5% on homes under $500,000, scaling upward for higher prices. But where that money comes from matters just as much as how much you have.
Lenders want to see that your down payment is from your own savings or an eligible source — like a documented gift from an immediate family member, or proceeds from a sale. Money that appeared in your account recently with no paper trail raises red flags.
How to fix it: Keep your down payment funds in a dedicated account and avoid moving money around unnecessarily in the 90 days before you apply — lenders will ask for 90 days of bank statements. If you’re receiving a gift, make sure there’s a signed gift letter confirming it doesn’t need to be repaid. The First Home Savings Account (FHSA) and RRSP Home Buyers’ Plan are also worth exploring if you haven’t already.
5. Applying for the Wrong Amount at the Wrong Time
Some buyers fall in love with a property before talking to a mortgage professional, then find out they don’t qualify for that price point — or they apply too early and their situation changes before closing. Others apply at multiple lenders simultaneously, which dings their credit score with every hard inquiry.
How to fix it: Get a mortgage pre-approval before you start seriously shopping. Pre-approvals lock in a rate, clarify your budget, and show sellers you’re a serious buyer. Your mortgage broker can do a single credit pull and shop multiple lenders on your behalf without triggering repeated inquiries.
Timing also matters: don’t make any major financial moves between pre-approval and closing. That means no new cars, no new credit cards, no co-signing loans, and no sudden job changes.
The Bottom Line
Most mortgage approval problems aren’t surprises — they’re patterns that show up over and over. The earlier you know about them, the easier they are to address.
If you’re thinking about buying in the next 6–12 months, the best thing you can do is sit down with a mortgage broker now. They’ll review your full financial picture, flag any potential issues before they become problems, and help you put together the strongest possible application when the time comes.
Ready to get started? Connect with a Dominion Lending Centres mortgage professional today — no cost, no obligation, just clarity.