Most people approaching a mortgage for the first time have the same question underneath every other question: do I actually qualify? Credit score, income, and debt are the three things lenders measure. This page explains what those measurements are, what the thresholds look like, and what you can do if your numbers need work before you apply.
What Credit Score Do You Need for a Mortgage?
Your credit score affects two things in a mortgage application: whether you qualify at all, and which rate tier you land in. The higher the score, the more product options are available and the better the rate you can access.
| Credit Score | What It Means for Your Application |
|---|---|
| 720+ | Full product access, best available rate tiers, straightforward approval |
| 680–719 | Full product access, competitive rate tiers, no meaningful barriers |
| 660–679 | Most products available, slightly narrower rate tier access at some lenders |
| 620–659 | Limited conventional options; CMHC-insured products available with 5%+ down |
| 600–619 | Minimum threshold for CMHC-insured mortgages only; very limited product access |
| Below 600 | Outside eligibility for federally regulated lenders; alternative lender territory |
One practical note: the credit score shown in your bank’s app or a consumer monitoring service is often different from the score a lender pulls. Lenders use specific Equifax and TransUnion bureau reports and scoring models that are not always consistent with consumer-facing tools. The number from an actual credit pull is the one that matters for a mortgage application.
If your score is below 660 and a mortgage application is 6 to 12 months away, the section on improving your qualification below is the place to start.
How Lenders Calculate What You Can Afford — GDS and TDS Ratios
GDS — Gross Debt Service Ratio
GDS measures your housing costs against your gross income. The formula:
GDS = (Monthly housing costs ÷ Gross monthly income) × 100
Monthly housing costs include:
- Your mortgage payment (principal and interest at the stress test rate)
- Monthly property taxes (annual taxes divided by 12)
- Monthly heating costs (lenders typically use $150–$200 as a standard assumption)
- 50% of monthly condo fees, if applicable
The maximum GDS for a CMHC-insured mortgage is 39%. For conventional mortgages, lenders often apply a stricter standard of 32% to 36%, though this varies by lender.
TDS — Total Debt Service Ratio
TDS takes the GDS housing costs and adds all other monthly debt obligations. The formula:
TDS = ((Monthly housing costs + Monthly debt payments) ÷ Gross monthly income) × 100
Monthly debt payments include:
- Car loans and vehicle leases
- Student loan payments
- Personal loan payments
- Lines of credit minimum payments
- Credit card minimum payments (based on the minimum required, not what you actually pay)
- Any existing mortgage payments on other properties you own
The maximum TDS for a CMHC-insured mortgage is 44%. Most lenders apply limits between 40% and 44% for conventional mortgages.
The ratio that most often catches people off guard is TDS. Buyers who feel confident about their income sometimes discover that a car payment, a line of credit, and a credit card minimum together push TDS above the qualifying limit. Paying down or eliminating specific debts before applying can change what you qualify for significantly.
The Mortgage Stress Test
The stress test applies to all borrowers at federally regulated lenders, regardless of down payment size, income level, or whether it is your first mortgage or your fifth. It exists to confirm borrowers can service their mortgage if rates rise at renewal.
In practice: if the contract rate you are offered is 4.5%, you must qualify as if the rate were 6.5% (4.5% + 2%). That higher qualifying rate is what the lender uses to calculate your GDS and TDS ratios and determine your maximum mortgage amount. Your actual payments are calculated at 4.5%.
For first-time buyers in Kelowna, where detached homes regularly price above $800,000, the stress test is often the largest single constraint on purchasing power. Understanding the gap between what you earn and what the test will let you borrow is the first step in a realistic home search.
See the mortgage stress test guide for a full breakdown with worked examples at different income levels and purchase prices.
What Types of Income Count Toward Your Application?
Lenders want to see income that is stable, documented, and likely to continue. What counts and how it is calculated depends on the income type.
| Income Type | Documentation Required | How Lenders Calculate It |
|---|---|---|
| Full-time T4 employment | 2 years of T4s, 3 months of pay stubs, employment letter if salary has changed | Current gross salary, or average if it varies year to year |
| Part-time or seasonal employment | 2 years of T4s, recent pay stubs, employer letter confirming ongoing employment | 2-year average of T4 income |
| Contract employment | 2 years of T4s or Notices of Assessment, current contract confirming renewal or continuation | 2-year average; some lenders require continuity with the same employer |
| Self-employed | 2 years of T1 Generals and Notices of Assessment (line 15000), business registration or incorporation documents | 2-year average of declared net income; stated income programs available at some lenders for well-established businesses |
| Rental income | Signed lease agreement, Schedule T776 from your tax return, 12 months of rental deposit history | Typically 50% of gross rental income for the TDS calculation |
| Child or spousal support | Court order or registered separation agreement, 12 months of consistent deposit history | 100% included if documented and consistently received |
| Pension, CPP, or OAS | Pension income statement or government benefit letter confirming ongoing amount | 100% of the confirmed ongoing payment amount |
What Can Reduce or Block Your Approval?
- Missed or late payments in the past 2–3 years. Payment history is the largest component of your credit score. A single missed payment on a credit card or loan can reduce your score by 50 to 100 points depending on the severity and recency, and it flags the file for lender review.
- Credit utilization above 35%. Carrying high balances relative to your credit limits signals financial stress to the credit bureaus. A card with a $10,000 limit carrying an $8,000 balance is reducing your score even if every payment is made on time.
- New credit applications shortly before your mortgage. Each hard inquiry temporarily reduces your score. Opening a car loan, store card, or line of credit within six months of your mortgage application can shift you into a lower rate tier or complicate your file. If you need a vehicle, buy it after you close, not before.
- Undisclosed debts. Lenders pull your full credit report. Debt you have not mentioned appears there anyway. Disclosing everything upfront means your specialist can plan around it. Surprises at underwriting cause delays and occasionally reversals.
- Down payment that cannot be traced. Lenders require a 90-day paper trail for down payment funds. Cash deposits without a documented source, large unexplained transfers, and gifted funds without a formal gift letter are all underwriting red flags. See the down payment guide for what is acceptable and how to document it properly.
- Recent job change or employment gap. Starting a new job immediately before applying is not automatically disqualifying, but it requires more documentation and some lenders require a probationary period to be complete. Employment gaps are assessed individually based on length, reason, and current employment status.
How to Improve Your Qualification Before Applying
Most qualification issues are addressable. The timeline depends on the issue and how much lead time you have.
- Pay down credit card and line of credit balances. Getting utilization below 35% can improve your score within 30 to 60 days of the reduction reporting to the bureau. This is the fastest available credit improvement for most people.
- Stop applying for new credit. Hard inquiries affect your score most in the first 12 months. Protect your score from new inquiries as soon as you know a mortgage is on the horizon.
- Keep old accounts open. The length of your credit history is a component of your score. Closing unused accounts shortens your average account age and can reduce your score, even if the account carries a zero balance.
- Eliminate debts that are pushing your TDS over the limit. A car loan you could pay out, a line of credit you could zero, or a student loan you could accelerate might move your TDS from above the qualifying threshold to below it. That changes your maximum mortgage amount substantially.
- Let time do its work on past problems. If you have past missed payments or a collection, the impact fades with consistent clean payment history. Two years of on-time payments after a problem period is typically enough to qualify, depending on the severity of the original issue.
The most efficient first move is a pre-approval conversation before making any changes. Knowing your actual score, your current ratios, and exactly where you sit relative to the thresholds tells you what to fix first. Paying off the wrong debt does nothing if the real barrier is your credit score, and improving your score does nothing if the barrier is a TDS ratio that a specific debt elimination would solve.
Common Questions About Mortgage Qualification
Can two incomes be combined on one mortgage application?
Yes. When two applicants are on the mortgage, both incomes are included in the qualifying calculation and both credit profiles are assessed. If one applicant has a significantly lower score, it can affect the rate tier or trigger additional conditions depending on the lender. The application structure — whether both are on title, whether one is primary — is something to discuss with your mortgage specialist before applying.
Does a co-signer help with qualification?
A co-signer or guarantor (the structure varies by lender) adds their income and credit profile to your application, which can help with GDS/TDS ratios and overall credit strength. However, the co-signer takes on full legal responsibility for the debt. It is a significant financial commitment, not a formality. The debt also appears on the co-signer’s credit bureau, which can affect their own ability to borrow in the future.
Is there a minimum income required?
There is no fixed dollar minimum. Lenders assess affordability through the GDS and TDS ratios. The question is whether your income, relative to your debts and the housing costs for the property you want to buy, results in ratios within the qualifying limits. A lower income can still qualify if debts are low and the purchase price is appropriate for what the income supports. The only number that tells you where you actually stand is the one from a pre-approval with real documentation reviewed.
What if my credit score is below 600?
Below 600 is outside the eligibility range for federally regulated lenders. If your score is in this range, there are alternative and private lenders who work with borrowers in this situation — Bonnie will tell you that directly and point you toward the appropriate resources rather than waste your time. If your score is between 600 and 660, the conversation is still worth having. Product access depends on the full file, not the score alone.
How long does a pre-approval take?
With complete documentation ready, one to two business days is typical. The time usually goes to gathering documents rather than to the approval itself. The required documentation guide lists exactly what you need so the first conversation can move directly to your actual file.