When the Bank Says No

Credit History

Let’s start with credit, which is a biggie. First off, if your credit score isn’t above a certain level, your application might be declined. Banks and Mortgage Insurers look for beacon scores over 600 to determine if they can lend to you. What is reporting on your credit file is equally important, if you have recent mortgage arrears, you could be denied for a subsequent mortgage. The same goes for past foreclosures, bankruptcies, collections, late payments, or arrears. Another credit issue that is when borrowers open new credit cards or accumulate debts just before the mortgage approval process. Doing so can hurt your credit score and/or increase your total monthly liabilities, affecting your affordability.

Down Payment

Another common issue is confirming the necessary funds to close your mortgage. Normally, you will require both down payment money and closing costs confirmed for a certain number of months in your bank. Verifying the source of funds is equally important as all lenders have to follow Anti-Money Laundering guidelines. So if you have been saving your tips under your mattress you may want to consider this beforehand.

Debt Levels and Debt Ratios

Even with a high income, elevated debt levels can impact your ability to secure mortgage approval. At The Mortgage Advisors, we help clients understand and manage these factors before they become obstacles.

Lenders look closely at two key affordability measures:

• Gross Debt Service (GDS): the portion of your income needed to cover housing costs (mortgage, property taxes, heating, etc.)
• Total Debt Service (TDS): your housing costs plus all other debts (credit cards, car loans, lines of credit)

Here’s where many borrowers get caught off guard: lenders don’t base their calculations on what you actually pay each month. Instead, they use standardized minimum payment assumptions, which are often higher than you would expect.

Paying down debt before applying can make a noticeable difference, sometimes enough to move an application from declined to approved.

Mortgage Stress Test

The mortgage stress test is one of the most misunderstood parts of the approval process.

In Canada, borrowers must qualify at a higher “stress test” rate, not the actual rate they’ll be paying. The idea is to ensure you can still afford your mortgage if interest rates increase.

In practice, the mortgage stress test can significantly reduce your borrowing power.

• You may qualify for less than expected
• You may need to adjust your purchase price
• In some cases, it can lead to a mortgage decline altogether

At The Mortgage Advisors, we help you understand your true purchasing power upfront so you can move forward with clarity and confidence.

Changes During the Mortgage Process

Even with pre-approval, your mortgage isn’t fully secured until closing.

One of the most common reasons approvals fall apart is due to changes made during this period.

For example, many buyers start purchasing furniture or appliances for their new home before closing—often using credit. While it seems harmless, taking on new debt can increase your debt ratios and directly impact your approval.

Other changes that can raise concerns include:

• Applying for new credit
• Missing or late payments
• Changing jobs or income structure

At The Mortgage Advisors, we proactively advise you on what to avoid during this period, helping protect your approval from unexpected setbacks.