Purchase Mortgage in Vancouver: Know Your Number First

How much can you actually borrow?

Lenders look at three things: how they count your income, what you already owe, and what the property costs to carry each month. Those feed two debt service ratios, and the ratios produce a ceiling. Two people with the same income can land far apart, because income is counted differently depending on the file.

Then there is the stress test. Most federally regulated lenders make you qualify at your contract rate plus two percentage points, or at a floor rate, whichever is higher. The rate you sign is not the rate you are approved on, so your ceiling is generally lower than a payment calculator suggests.

A number you can rely on comes from running your actual documents once. Everything before that is a direction, not a number.

What does a pre-approval actually lock in?

It locks a rate, not an approval. Most lenders hold a rate for a set window, commonly a few months, and it expires. It also tells you roughly what range you sit in based on what you have handed over so far.

What it does not lock is longer. The property has not been appraised, income verification may not be finished, and your debts can change in the meantime. Final approval is against a specific property and a complete file.

A real pre-approval means a lender has read your documents. An online calculator is arithmetic.

Should you shop for a home first, or a mortgage first?

Mortgage first. Once you know your number, every listing you walk into is one you can act on.

The other order has a real price. Finding out after an accepted offer that the financing is short means adding cash, renegotiating, or walking away from a deposit. Sellers here generally prefer clean offers, and a real pre-approval changes where you stand.

How much down payment do you need, and what else has to be cash?

It is tiered by price. The current federal minimums are 5% on the first $500,000 of the purchase price and 10% on the portion between $500,000 and $1.5 million. Above $1.5 million, default insurance is not available, so 20% down is generally the floor.

Under 20% down means an insured mortgage and an insurance premium, usually added to the loan. At 20% or more there is no premium, but underwriting can be tighter, because no insurer is standing behind the file.

Budget closing costs separately: BC property transfer tax, legal fees, inspection, adjustments. First-time buyers may qualify for a transfer tax exemption depending on price and status. That money cannot come out of the down payment.

What changes if you are self-employed?

Lenders read your tax returns, not your revenue. Most A lenders average the net income on your last two years of filings, which is often well below what the business actually produces.

There are generally three routes. Clean up two years of filings and go conventional; use a program built for business-for-self borrowers, which usually asks for more down payment or prices differently; or work with a lender that reads bank statements, where the cost is higher. Which one fits depends on your filings and your down payment.

The most useful move is deciding two years ahead. Writing income down to the floor and then applying is the trade that costs people the house. How you file is a question for your accountant. I only speak to the lending side.

New to Canada. Can you get a mortgage?

Generally yes, but through a different door. Most lenders have programs for applicants with a short Canadian credit history or foreign income, and they usually ask for more down payment and heavier documentation.

Three things trip up newcomer files: almost no domestic credit history, income documents from a foreign employer, and down payment funds that just landed. The last one matters most. Most lenders want the funds seasoned in your own account with a clean paper trail back to the source.

There are also federal restrictions on non-Canadians buying residential property, with exceptions. Confirm where you sit on status before you make plans.

Who is this hardest for, and what should they do?

Three groups: self-employed people who file low, newcomers with no domestic credit, and anyone carrying late payments, a consumer proposal, or a bankruptcy. The problem is usually not income. It is that the file does not tell a story a lender can sign off on.

The fixes are specific. Self-employed: plan filings two years out, and keep financial statements and bank statements ready. Newcomers: open a credit card on arrival, pay it in full and on time, and document where the down payment came from. Bruised credit: clear the delinquencies, get card balances well under their limits, and let a few months pass before applying.

If waiting is not possible, B lenders and private lenders exist. The rate and the fees are higher, and they are generally a bridge for a year or two, not a destination. My job is to get it done, not to put you in a product you do not need.

What documents are needed, and how long does it take?

Salaried: two recent pay stubs, a job letter, two years of T4s and Notices of Assessment, 90 days of history on the down payment funds, and photo ID. Self-employed adds two years of full T1s and Notices of Assessment, business financial statements, and proof the business exists.

With a complete file, a pre-approval generally takes a few business days. Real approval starts when you have an accepted offer, and with the appraisal and verification it usually runs one to two weeks. Every missing document moves the date back.

This is general information, not advice on your specific situation. What your file looks like is something someone has to actually read.

Common questions