The Top Challenges in Getting a Mortgage in Canada - Solutions Inside!

Getting a mortgage in Canada isn’t as straightforward as it used to be. Federal qualification rules, high home prices in the GTA, and strict lender criteria mean even buyers with solid incomes can hit unexpected roadblocks. The good news? Many common challenges have a practical next step—once you know what lenders are really looking for.

Below, you’ll find the most common obstacles Canadian borrowers face in 2026, what causes them, and exactly what you can do to overcome each one.

Quick answer: The biggest challenges in getting a mortgage in Canada are passing the federal stress test, saving the minimum down payment, staying within GDS/TDS debt limits, proving self-employed income, and qualifying with bruised credit. Solutions include using the FHSA and Home Buyers’ Plan, paying down or consolidating debt before applying, preparing two years of Notices of Assessment, and working with a mortgage broker who can compare A-lenders, B-lenders, credit unions, and private lenders.

1. Passing the Mortgage Stress Test

The challenge: Even if a lender offers you a low rate, federally regulated lenders must qualify you at the Minimum Qualifying Rate set by OSFI. This is the higher of your contract rate plus 2% or 5.25%. So, if you’re offered 4.29%, you need to prove you can afford payments at 6.29%. This can significantly reduce your borrowing power.

The solution:

• Add a co-borrower or include eligible additional income like rental, part-time, or bonus income with a solid history.
• Choose a lower-priced home or increase your down payment to reduce the loan amount.
• Compare lenders. Some credit unions are provincially regulated and may have different qualifying guidelines than federally regulated banks.
• If you are renewing an uninsured mortgage, ask whether a straight switch to another federally regulated lender qualifies for the stress-test exemption. Increasing the loan amount or amortization can change the rules.

2. Saving the Minimum Down Payment

The challenge: Saving a down payment while paying rent can be difficult, especially when the home price is high. Since December 15, 2024, the minimum down payment rules are:

For example, a hypothetical $900,000 home in Vaughan or Richmond Hill needs at least $65,000 down. A down payment below 20% typically requires mortgage default insurance from CMHC, Sagen or Canada Guaranty.

The solution:

• First Home Savings Account (FHSA): contribute up to $8,000 a year ($40,000 lifetime), deduct contributions from your taxable income, and withdraw tax-free for your first home.
• RRSP Home Buyers’ Plan (HBP): withdraw up to $60,000 per person ($120,000 for a couple) tax-free, repaid over 15 years.
• Gifted down payment: most lenders accept gifts from immediate family with a signed gift letter confirming the money doesn’t need to be repaid.
• Ontario and Toronto land transfer tax refunds can reduce the cash you need at closing.

See every program you may qualify for in our First-Time Home Buyer in Ontario: 2026 Incentive Cheat Sheet.

3. High Debt-to-Income Ratios (GDS and TDS)

The challenge: Lenders measure your debt using two ratios, calculated at the stress-tested rate:

A car payment or a high credit card balance can push your TDS over the limit, even when your income is strong.

The solution:

• Pay down credit cards and revolving lines of credit before you apply.
• Avoid new car loans or financing in the months before your application.
• Consolidate high-interest debt into one lower payment to reduce your monthly obligations.
• Choose a 30-year amortization if you’re an eligible first-time buyer or buying a new build, which lowers the monthly payment used in your ratios.

4. Self-Employed or Non-Traditional Income

The challenge: Banks prefer salaried T4 income. If you’re self-employed, a freelancer, a contractor, a commission earner or still on probation, lenders see more risk. Business owners also often reduce their taxable income through legitimate write-offs, which lowers the income a bank can use to qualify you.

The solution:

• Prepare at least two years of T1 Generals and Notices of Assessment (NOAs), and be ready to explain any outstanding tax balance to the lender.
• Have business registration, financial statements (if incorporated) and business bank statements ready.
• Ask about stated-income or Business-for-Self programs, which some lenders offer for borrowers whose tax returns don’t reflect their true earnings.
• Consider B-lenders that assess gross revenue or bank deposits instead of net income.

Learn more about our self-employed mortgage solutions.

5. Bruised Credit or a Thin Credit History

The challenge: A-lender credit criteria vary by institution and mortgage product. Missed payments, collections, a consumer proposal or a short credit history (common for newcomers to Canada) can lead to a decline at the bank.

The solution:

• Pay every bill on time and keep credit card balances well below their limits.
• Don’t apply for multiple new credit products before your mortgage.
• Check your credit report for errors and dispute anything incorrect.
• Use a B-lender or private lender as a short-term bridge, with a clear plan to move back to a bank rate once your credit improves.

A-Lenders vs. B-Lenders vs. Private Lenders

Knowing the lender types is one of the most useful ways to solve a mortgage challenge. Your options aren’t limited to your own bank.

Read our full guide to private vs. traditional mortgages in Ontario to see which option fits your situation.

6. Choosing a Mortgage Based Only on the Rate

The challenge: The lowest advertised rate isn’t always the cheapest mortgage. Some low-rate products come with high prepayment penalties, limited prepayment privileges, or no portability if you move.

The solution: Compare the full mortgage, not just the rate. Ask about:

• Prepayment penalties: fixed-rate mortgages often use an interest rate differential (IRD) penalty, which can be far higher than the three months’ interest usually charged on variable mortgages.
• Prepayment privileges: how much extra you can pay each year without a penalty.
• Portability: whether you can take the mortgage with you if you sell and buy another home.
• Fees and restrictions: lender fees, bona fide sale clauses, and renewal terms.

You can compare today’s mortgage rates from multiple lenders on our website.

7. Shopping for a Home Before Getting Pre-Approved

The challenge: Making offers before you know your real budget can lead to losing a home or, worse, a firm offer you can’t finance.

The solution: Get a written pre-approval before you start shopping. A pre-approval estimates your borrowing range, can hold your rate for up to 120 days, and uncovers credit, income or property issues early. Our First-Time Homebuyer’s Guide to Getting a Mortgage walks through the process, and our First Mortgage in Canada Cheat-Sheet explains every qualification rule in detail.

8. Underestimating Closing and Ownership Costs

The challenge: Many first-time buyers budget only for the down payment. Lenders also want to see funds for closing costs, and ownership brings ongoing expenses.

The solution: Plan for closing costs of about 1.5% to 4% of the purchase price, including:

• Ontario land transfer tax, plus Toronto’s municipal land transfer tax for homes in the city
• Legal fees and title insurance
• Home inspection and appraisal
• Ontario PST on your mortgage insurance premium, paid at closing
• Property taxes, utilities, condo fees, home insurance and maintenance

Mortio works with buyers and homeowners across Markham, Vaughan, Richmond Hill, Downtown Toronto, Mississauga, Brampton, Scarborough, North York and Newmarket. With one application, we compare your file across banks, credit unions, alternative lenders and private lenders to find the approval and terms that fit your situation, whether you’re a first-time buyer, self-employed, new to Canada or rebuilding your credit. Explore our Ontario mortgage options and first-time home buyer mortgage programs.

For most buyers, it’s passing the stress test and saving the minimum down payment. In the GTA, high home prices make both more difficult.

A-lender credit criteria vary by institution and mortgage product. B-lenders and private lenders can work with lower scores, usually at higher rates.

Yes. Most lenders want two years of self-employment history and Notices of Assessment. If your taxable income is low because of write-offs, stated-income programs and B-lenders can help.

Federally regulated lenders generally apply it to new mortgages. Some provincially regulated credit unions and private lenders use different guidelines. An uninsured straight switch at renewal may be exempt from the prescribed stress-test rate if the loan amount and amortization do not increase.

A-lenders, such as major banks, offer the lowest rates but have strict criteria. B-lenders accept more flexible credit and income situations in exchange for higher rates and possible fees.

Yes. Most lenders accept gifted funds from immediate family members with a signed gift letter confirming the money is not a loan.

Every mortgage challenge is easier to solve with a clear plan. Tell us three things: Are you a first-time buyer? Are you salaried or self-employed? Which GTA city are you buying in? Our team will review your options and estimate what you can qualify for. Get your free mortgage quote or contact our team for a free, no-obligation consultation.

• Minimum down payment
• Mortgage qualifying rate and straight switches
• CMHC insurance premiums
• FHSA rules
• Home Buyers’ Plan