Buying a home is one of the biggest financial decisions most people will ever make. It’s an exciting milestone, but it can also feel overwhelming when it comes time to sit down with a lender. Many applications are slowed down or declined not because people can’t afford a home, but because they weren’t financially prepared before applying. The good news is that with the right planning, you can put yourself in a stronger position and make the mortgage approval process much smoother.
Here are some key steps to take before you apply for a mortgage.
1. Check and Strengthen Your Credit Score
Your credit score plays a major role in determining whether you qualify for a mortgage and what interest rate you’ll be offered. A higher score can save you thousands of dollars in interest over the life of your loan.
Start by pulling your credit report from Canada’s two main agencies, Equifax and TransUnion. Review your report carefully for any errors, such as accounts you don’t recognize or incorrect late payments. If you find mistakes, dispute them right away.
To improve your score:
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Pay all bills on time, every time.
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Keep your credit card balances low compared to your limit.
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Avoid applying for new credit cards or loans in the months leading up to your mortgage application.
2. Reduce Existing Debt
Lenders look at your debt-to-income ratio — the percentage of your monthly income that goes toward paying debts. The lower this number, the more comfortable lenders will be approving your mortgage.
Focus on paying down high-interest debt such as credit cards first. If you have multiple loans, consider consolidating them into a lower-interest option. Even making consistent extra payments toward debt can improve your financial picture and show lenders you’re serious about managing your money.
3. Save for a Down Payment and Closing Costs
One of the biggest hurdles for homebuyers is the down payment. In Canada, the minimum is 5% of the purchase price for homes under $500,000, but putting down more gives you greater buying power and reduces your monthly payments.
In addition to the down payment, set aside money for closing costs, which typically range from 1.5% to 4% of the home’s purchase price. These include legal fees, appraisal fees, land transfer taxes, and other expenses that catch many buyers off guard. Planning ahead for these costs ensures there are no last-minute surprises.
4. Build a Solid Emergency Fund
Lenders want to see that you can handle unexpected expenses without falling behind on your mortgage. Having three to six months’ worth of living expenses set aside in an emergency fund provides that safety net.
This fund can also help you cover homeownership surprises, such as a furnace repair or roof leak. It shows financial stability and gives you peace of mind once you move in.
5. Get Pre-Approval Ready
Being pre-approved for a mortgage shows sellers that you’re serious and helps you know exactly how much you can afford. To get pre-approved, you’ll need to provide documents such as:
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Recent pay stubs or proof of income.
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Tax returns and notices of assessment.
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Bank statements for checking and savings accounts.
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Records of other debts and assets.
Having these ready to go saves time and makes the process far smoother.
6. Avoid Major Financial Changes Before Applying
It can be tempting to celebrate the idea of buying a new home by purchasing furniture, a new car, or even switching jobs for higher pay. But big changes before applying for a mortgage can raise red flags for lenders.
Try to keep your financial situation steady in the months before your application. Wait until after you’ve secured the mortgage to make major purchases or career moves.
Conclusion
Getting your finances ready before applying for a mortgage is one of the smartest steps you can take toward homeownership. By strengthening your credit, reducing debt, saving for your down payment and closing costs, and preparing your documents, you’ll present yourself as a strong candidate to lenders.
At DHARRO, we know that buying a home is more than a financial transaction — it’s about creating a secure foundation for your future. With the right preparation, you can move through the mortgage process with confidence and focus on what really matters: finding the home that’s right for you.