Get your financing sorted before you fall for a house. Here's how pre-approval works in 2026 and what lenders look at.
A pre-approval tells you how much a lender is likely to lend you, at what rate, and holds that rate for a set period (often 90 to 120 days). It is not a guarantee: the lender still has to approve the specific property and re-verify your file. But it turns house hunting from guesswork into a budget.
The stress test
To qualify, you must show you can afford your payments at the higher of your contract rate plus 2% or 5.25%. If your rate is 4.25%, you qualify at 6.25%. This applies whether or not your mortgage is insured, at federally regulated lenders.
Lenders run that stress-tested payment through two ratios: how much of your income goes to housing costs, and how much goes to housing plus all other debts. Car loans, lines of credit and credit card balances all count.
Down payment rules
| Purchase price | Minimum down payment |
|---|---|
| Up to $500,000 | 5% |
| $500,000 to $1,499,999 | 5% of the first $500,000 plus 10% of the rest |
| $1.5 million and up | 20% |
Example: on an $850,000 Milton townhouse, the minimum is $25,000 plus $35,000, so $60,000. With less than 20% down you will pay mortgage default insurance, added to your mortgage. In Ontario, provincial sales tax on that insurance premium is due in cash at closing and can't be added to the loan, so budget for it.
First-time buyers and buyers of newly built homes can get a 30-year amortization on an insured mortgage, which lowers the payment and can raise how much you qualify for.
Where your down payment can come from
- FHSA: First Home Savings Account. Contributions are tax-deductible and qualifying withdrawals for a first home are tax-free. $8,000 a year, up to $40,000 lifetime.
- RRSP Home Buyers' Plan: borrow from your RRSP for a first home and repay over time.
- Gifts: from immediate family, with a signed gift letter. Lenders want to see the funds in your account before closing.
- Savings: lenders typically want to see 90 days of history on the money.
Documents to have ready
- Government photo ID
- Recent pay stubs and an employment letter
- Last two years of T4s and Notices of Assessment (two years of full returns if self-employed)
- 90 days of statements for your down payment accounts
- Details of any debts and other properties you own
Bank or mortgage agent?
A bank can only offer its own products. A mortgage agent or broker shops your file across many lenders, including ones that are more flexible with self-employed income, newer credit or rental income. For most buyers the service costs nothing; the lender pays the brokerage.
While you're pre-approved
Don't open new credit, finance a car, change jobs or move your down payment around without checking first. Any of these can change your approval right before closing.
Start online or talk it through. You can start an application on your own, or book a call with Steve.
Rules current as of October 2026. Rates and lender policies change; confirm your numbers with a licensed professional.
Ready to Get Pre-Approved?
Start an application on your own time, or talk it through with Steve first.