A pre-approval is only as useful as the assumptions behind it. Get the inputs right and it's a real number you can shop with in confidence; get them wrong — or skip a proper pre-approval altogether — and you risk falling for a home you can't actually close on.
The two ratios that actually decide your number
Lenders don't just look at your income. They calculate two debt-service ratios:
- Gross debt service (GDS) — your mortgage payment, property tax and heating costs (plus half of any condo fee), as a percentage of your gross income. Lenders generally want this at or under 39%.
- Total debt service (TDS) — the same calculation, but including every other debt payment you carry: car loans, credit cards, student loans, lines of credit. Lenders generally want this at or under 44%.
TDS is where a lot of buyers get surprised. A $600/month car payment or a maxed-out credit card doesn't just reduce your cash flow — it directly shrinks the mortgage amount you qualify for, sometimes by well over $100,000.
You qualify at a higher rate than you'll actually pay
The federal mortgage stress test requires you to qualify at the greater of your contract rate plus 2%, or a federally set minimum qualifying rate — even though your actual payment will be based on the lower contract rate. It's a deliberate buffer against future rate increases, and it's the single biggest reason a pre-approval number often feels lower than buyers expect going in.
What a lender actually wants to see
A real pre-approval — not an online, unverified estimate — typically requires:
- Income documentation. Recent pay stubs and a letter of employment for salaried employees; two years of tax returns (T1 General and Notice of Assessment) plus financial statements for self-employed applicants, who face meaningfully more scrutiny.
- Credit report and score. Lenders pull your credit directly. A score above roughly 680 generally opens up the best rates; below that, you're not shut out, but your rate and lender options narrow.
- Down payment source. Lenders want to see where the down payment is actually coming from — savings, an RRSP withdrawal under the Home Buyers' Plan, or a gifted down payment (which typically requires a signed gift letter confirming it's not a loan).
- A list of debts and assets. Every loan, credit card limit and line of credit factors into your TDS ratio, whether you're currently carrying a balance or not.
Pre-approval isn't a guarantee
A pre-approval is a lender's assessment of you — it isn't yet tied to a specific property. The property itself still has to appraise at or above the purchase price, and the lender does a final review before funding. That's exactly why a financing subject in your offer still matters even with a pre-approval in hand: it protects you if the specific property doesn't clear underwriting.
How long it's valid, and what changes it
Most pre-approvals hold a rate for 90 to 120 days. Taking on new debt, changing jobs, or a material change in income during that window can change your number — tell your mortgage broker or lender before you make any of those moves while house hunting, not after.
Ready to see what you actually qualify for? Talk to a Renanza agent and we'll connect you with a mortgage professional before you start touring homes — a real pre-approval is the first step, not an afterthought.