Getting pre-approved: how the stress test fits in

How does pre-approval relate to the stress test?

A mortgage pre-approval is the lender running the stress test on your real numbers before you shop. The lender takes your documented income, debts and down payment, works out the qualifying rate (the greater of the rate it's offering you plus 2 points or 5.25%), and finds the highest amount where your housing costs and debts stay within its limits. For insured loans those limits are 39% (GDS) and 44% (TDS) of gross income; for uninsured loans each lender sets its own. The same formula applies whether you're pre-approved for a fixed or a variable rate, and for any term.

Many pre-approvals come with a rate hold for a period, so the number doesn't shrink if rates rise while you look. How long a hold lasts, and whether you get a lower rate if rates fall, varies by lender; ask both questions.

A pre-approval isn't a final approval. The lender still has to approve the specific home and confirm your documents, and anything that changes in your finances before closing can change the answer.

This page covers one part of pre-approval: how the stress test sets your number. For the whole process (getting ready, the documents, and reading the letter you get back), our sibling site MortgagePreApprovals.ca walks through it step by step.

How much would a lender pre-approve? A worked example

Here is the arithmetic a lender does, step by step, for one household. They're first-time buyers in Calgary, so the property tax uses the city's published 2026 residential rate rather than a national guess.

What does a rate hold protect?

Your pre-approved amount is tied to the rate. Here's the same Calgary household as the offered rate moves:

Each quarter point costs this household roughly $11,900 of buying power. A rate hold locks the left-hand column for its term, which is why it's worth getting before you make offers, not after.

Treat the pre-approved number as a ceiling, not a target. At $616,900, this household's real mortgage payment would be about $3,151 a month, plus roughly $342 of property tax and $120 of heating: 33% of gross income before any other bills, savings or upkeep. The stress test checks that you could cope with a higher rate; it doesn't check that the payment fits the rest of your life.

Does a 30-year amortization raise your pre-approval?

For first-time buyers, yes. Since December 15, 2024, first-time buyers and buyers of new builds can get a 30-year amortization on an insured mortgage. A longer amortization lowers the payment the lender tests, so the same income passes at a higher price. Everyone else with under 20% down is held to 25 years.

Thirty years raises this ceiling by $37,600. On the same $616,900 home it trims the payment by $292 a month, adds $1,138 to the premium and, at a constant rate, about $83,000 of interest over the life of the loan. Ask the lender to pre-approve you at both, so you know what each choice is worth.

What does a lender check beyond the stress test?

Passing GDS and TDS at 6.12% is necessary, not sufficient. Expect the lender to look at:

• Credit. For an insured loan, at least one borrower or guarantor needs a credit score of 600 or more. Lenders can set a higher bar and also look at your payment history.
• Income. How stable it is and how it's documented. Salaried income is simplest; self-employed, commission and rental income are each handled by the lender's own policy.
• Debts. Your other debt payments count in TDS, including card and line-of-credit balances. Many lenders count about 3% of a revolving balance as a monthly payment, a convention rather than a rule.
• Down payment. At least the federal minimum for the price (5% of the first $500,000 and 10% of the rest), and proof of where it came from.
• The property. For an insured loan the price must be under $1,500,000, and the lender has to be satisfied with the home itself before the final approval. Condo fees count too: 50% of them for insured loans.

What documents do you need for pre-approval?

Lists vary by lender, but most ask for some version of these:

• Government photo ID for each borrower.
• Proof of income: recent pay stubs and a letter of employment; if you're self-employed, tax returns and notices of assessment for recent years.
• Proof of down payment: recent statements for the accounts it's coming from, and a gift letter if family is contributing.
• Details of your debts: loans, leases, lines of credit, support payments.
• Your consent for a credit check.

What can undo a pre-approval?

The lender will recheck before closing. A common self-inflicted problem is new debt. If the Calgary couple financed a car at $550 a month after being pre-approved, the highest price they'd pass at would drop from $616,900 to $568,800, a $48,100 cut. The payment goes straight into TDS, and $550 is more than the $200 of slack TDS had, so TDS becomes the limit. Other things that can change the answer: a job change or income drop, a missed payment, a rate hold expiring, or an offer above the pre-approved price.

What do people get wrong about pre-approval?

• "Pre-approved means approved." It's conditional. The lender still has to accept the home itself and take a fresh look at your finances before the final approval.
• "The pre-approved amount is what we can afford." It's what passes at the qualifying rate under the lender's ratio limits. Your own budget for childcare, savings and repairs isn't part of the test.
• "With 20% down we skip the stress test." Not at a bank or federally regulated trust company: OSFI's B-20 applies the same qualifying rate to uninsured loans. See the stress test rules.
• "A variable rate gets a bigger pre-approval." Only to the extent its rate is lower. The test is the same formula, and below a 3.25% contract rate the 5.25% floor takes over.
• "We'll sort the car after we're approved." As the example shows, a new payment before closing can cut the amount you qualify for.

Before you apply, run the same test yourself on the stress test calculator so you know which ratio is tight, and check a single price line by line in the GDS and TDS calculator. If you come up short, how to pass the stress test ranks each lever; if you're buying your first home, read the first-time buyer rules.

Want a person to look at your numbers?

If you'd like a second pair of eyes before you apply, send a note below. It goes to the MITEY network team, and a person replies by email. Nothing you send is shared with a lender unless you ask us to.