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Published November 4, 2022

How to Apply for a Mortgage in Canada

Get your credit in order, determine an affordable budget, choose a mortgage type, compare lenders and get pre-approved.

A mortgage is a secured loan typically used to buy a house or property. To get a mortgage, you have to apply via a mortgage broker or lender. 

Among other things, the mortgage application helps the lender assess your financial health and determine whether you will be able to repay the funds they may lend to you. 

Here are the general steps to to follow when applying for a mortgage in Canada.

5 steps to apply for a mortgage

Step 1: Get your credit in order

The first step in the mortgage application process is to make sure your credit report is error-free and your credit score is high enough to meet lender requirements. 

You can order a credit report and credit score from providers like Equifax, TransUnion or Borrowell. Look through the entire report carefully and make sure there are no errors. 

If your credit score is low consider taking some extra time to work on building it up. A poor credit score can mean having to make a higher down payment, paying a higher interest rate, or even having your mortgage application denied.

Step 2: Figure out what you can afford 

Next, you need to figure out how much home you can actually afford. Your mortgage application will document your down payment and current interest rates. Both will help determine how much you can afford for your monthly payment.

You will have to prove to your lender that you can afford the amount that you are asking for when it comes time to apply for your mortgage. Knowing what you can afford will also help ensure you stay within your budget.

To do this, look at:

  • Your pre-tax income.
  • Living expenses including utilities.
  • Any existing debts.
  • The amount you borrow and the subsequent monthly payments.
  • The amortization period.
  • Closing and moving costs.

The above checklist is similar to the one potential lenders use when deciding how much they are willing to let you borrow.

When you apply for a mortgage, the lender will also have you do a stress test to ensure you’ll be able to afford your mortgage payment, even if interest rates increase.

Step 3:  Choose a mortgage type

A mortgage isn’t one-size-fits-all, which means you will have to determine which type of mortgage best suits your needs and your lifestyle. Some of the main things to consider include:

  • Term. The mortgage term is the length of time your mortgage contract is in effect before you need to renew. Terms can range from a few months to 5years or more. You will likely have multiple terms throughout your mortgage.
  • Amortization period. Longer amortization periods mean lower payments, but you end up paying more in interest.
  • Type of interest rate. Fixed interest rates stay the same throughout the entire mortgage term while variable interest rates can fluctuate throughout the term. 
  • Payment frequency. This can range from monthly to weekly with several accelerated options as well. 
  • Open or closed mortgage. Open mortgages may offer more flexibility to pay off your mortgage but usually have higher interest rates, while closed mortgages may have lower interest rates but less payment flexibility.

Step 4: Compare mortgage lenders 

When you have figured out how much you can afford and what type of mortgage you would like, it’s time to shop around and compare mortgage lenders. You’ll want to compare mortgage products, fees and interest rates and also learn more about the application process. For example, do they offer pre-approval?

The first way to do this is to go to the lenders directly. This means going from bank to bank or credit union to credit union to compare rates and options. A lot of this work can be done from the comfort of your home either online or over the phone, but it still can be quite time consuming.

A second option is to work with a mortgage broker who will do all this legwork for you. They will compare the mortgage products and rates offered by a number of lenders and find the best options for your needs. Mortgage brokers are professionals, but if you plan on hiring one do your due diligence to ensure you get someone who has the experience and good reviews to back their work. 

If you are struggling to find a traditional mortgage that you can qualify for, then you can look to a private lender for a mortgage. Typically, you only go to a private lender if you can’t be approved by an A or B lender. Private mortgages are often short-term mortgages with high interest rates that can be helpful if you are stuck but do come with significantly more risk. Should you need to resort to a private lender, you can search for them yourself or an experienced mortgage broker can point you in the right direction.

Step 5: Apply for pre-approval with your chosen lenders

Once you have found a couple of lenders with mortgage products that fit what you are looking for it’s time to get mortgage pre-approval. Getting pre-approved means that you’ll know the maximum amount of mortgage you could qualify for, so you can  estimate your monthly payments and ensure they line up with what you can afford. When you are pre-approved for a mortgage the interest rate is locked in for a period of time (usually 60 to 120 days depending on the lender). Pre-approval isn’t necessary, but it is a handy step when buying a home and many lenders will let you pre-apply for a mortgage online.

To apply for mortgage pre-approval you will need to provide documents showing:

  • Identification.
  • Proof of employment.
  • Proof that you can afford the down payment and closing costs.
  • Information about all your other personal assets
  • Information about your debts.

The potential lender will also look at your debt service ratios (which you would have figured out doing a stress test at home) and will do a credit check. It’s also worth trying to negotiate with your lender at this stage as well, especially if you have a strong application. You may be able to get yourself better rates than those originally offered.

Once you’ve been pre-approved, you can finally get to the fun part: searching for a home.

About the Author

Hannah Logan

Hannah Logan is a writer and blogger who specializes in personal finance and travel. You can follow her personal travel blog EatSleepBreatheTravel.com or find her on Instagram @hannahlogan21.

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