One of the biggest factors in whether or not a lender will approve you for a mortgage is your credit score. Your credit score is a number between 300 and 900 that’s been calculated by a credit bureau to assess the likelihood you’ll pay your bills on time. In a nutshell, the higher your credit score, the more trustworthy you look to potential lenders. That said, if you’re a first-time home buyer who needs CMHC insurance, then your credit score will need to be at least 600.
What’s the Minimum Credit Score to get approved for a Mortgage in Canada?
To be approved for a mortgage in Canada, you typically need a credit score of at least 600. This is the current minimum credit score set by the Canada Mortgage and Housing Corporation (CMHC), which provides mortgage loan insurance on certain mortgages in Canada.
CMHC mortgage loan insurance is required if the home’s purchase price is less than $1,500,000 and you’re putting down less than 20% of the purchase price. To qualify for CMHC mortgage loan insurance, at least one borrower must have a credit score equal to or greater than 600.
Not all homebuyers will require CMHC mortgage loan insurance; however, most banks will also require a minimum credit score of 600 or higher.
The minimum credit score needed to be approved for a mortgage in Canada will vary from situation to situation, and lender to lender, but it’s a safe bet to assume you’ll need a credit score between 600 and 700 to qualify.
Don’t know your credit score? Check and monitor it for free at Borrowell.
Alternatively, you can check your score with Credit Karma or ClearScore. Both of these check your TransUnion score. ClearScore also offers credit education and different credit options that you may qualify for.
If you’re looking for a more detailed credit program, you can try Credit Verify. This paid program offers a variety of cool features, including their credit score simulator.
What’s the Easiest Bank to get a Mortgage with in Canada?
There’s no shortcut to getting approved for a mortgage. Every bank in Canada will assess your application slightly differently, so it’s not a bad idea to shop around a bit. Each one will potentially offer different loan amounts and interest rates.
There’s a misconception that too many inquiries about loans or mortgages on your credit file can actually hurt your credit score, but it’s just that—a misconception. According to Equifax (one of the two credit reporting bureaus in Canada), multiple inquiries on your credit score in a short period of time are counted as one inquiry, especially for things like mortgage approvals. This window of time allows rate shopping, so make sure you take advantage of it.
Banks vs. Mortgage Brokers: Which One is Better?
If you’re hunting around for a mortgage, don’t overlook mortgage brokers. While you may have a long relationship with your existing bank and you feel this will work in your favour, potentially increasing your chance of approval, that’s not necessarily the case.
Banks can only offer their own mortgage products, whereas mortgage brokers have access to multiple products from a wide range of banks and lenders. They shop around and negotiate on your behalf, potentially securing better rates and higher loan amounts.
What Credit Score is Needed to Buy a House in Canada?
When it comes to buying a house in Canada, the credit score required will vary from situation to situation. For instance, the price of a single-detached house in BC or Ontario will be dramatically different from that in Alberta or Quebec.
The higher the home’s purchase price, the greater the mortgage amount the average buyer will require. To get approved for a high mortgage amount, you’ll not only need to meet some high standards for income, but you’ll also need a very high credit score. This is because with a higher loan amount, lenders assume greater risk.
| Province | Minimum Credit Score for Mortgage Approval |
| Ontario | 600 |
| British Columbia | 600 |
| Quebec | 600 |
| Alberta | 600 |
Table: The minimum credit score required for mortgage approval won’t change too much depending on your province or territory.
While some lenders will look for a credit score of above 600, the absolute minimum credit score Canadians should have before applying for a mortgage—regardless of their province or territory—is 600. But your income and the required mortgage amount are other important factors (among others) that will determine the outcome of your mortgage application.
The Credit Score Required by Major Banks for Mortgages
In Canada, many major banks, including the Big Six banks, prefer a credit score of 680 or higher before they give you a mortgage. This is especially true if you’re getting an uninsured mortgage rather than an insured one. The credit score requirement to get a lower interest rate is 720 or higher.
Getting a Mortgage With a 550 Credit Score
While you can get a mortgage with a 550 credit score, most mortgage lenders prefer a minimum credit score between 600 and 680.
B-Lenders: B-Lenders, which are often alternative lenders and specialized credit unions, will often give you a mortgage with a credit score of 550. However, you’re often required to make a 25% down payment or use home equity, with a loan-to-value ratio of 75%.
Private Lenders: When you’re getting a private mortgage, private lenders don’t have a minimum credit score requirement. The lender’s primary focus is on the property’s equity, not on your Canadian credit history, unlike other lenders.
What Credit Score Do B-Lenders Accept?
To gain mortgage eligibility with b-lenders, you need a minimum credit score of 500. However, you may need a credit score of 550 for many standard approvals. Unlike traditional lenders, b-lenders don’t have insurance for high-ratio mortgages. This means that you need a minimum 20% down payment.
How Much Income Do You Need to Qualify for a $500,000 Mortgage in Canada?
When you’re applying for a mortgage, banks and lenders will look at your debt-to-income ratio to understand the state of your personal finances. This assessment determines whether you’ll be approved and for how much.
For example, someone with a high income and high debt might be approved for a lower mortgage amount than someone with a lower income but no debt.
As a general guideline, most financial experts recommend that no more than 30% of your gross annual income go towards housing expenses. For a $500,000 mortgage to be considered affordable, you’d need an annual income of around $150,000.
Most major banks and lenders have mortgage affordability calculators available online. You can use these to at least get a sense of the mortgage amount you might be able to afford.
Can You Get a Mortgage with a Credit Score Below 600 in Canada?
If your credit score falls below 600, you’re going to have a tough time getting approved for a mortgage through a bank. However, you do have some options. Here’s a look at some steps you can take.
1. Work with a Private Lender through a Mortgage Broker
If you have bad credit and can’t get a mortgage with a bank, you can try working with a mortgage broker to see if some private lenders are willing to offer you a mortgage instead. These lenders are more open to taking on some increased risk, but in exchange, the interest rates may be higher—so before you sign anything, make sure you’re confident you can afford the payments at the terms they’re offering.
2. Increase the Size of your Down Payment
This isn’t an option for everyone. You might even be hoping to buy a house with no down payment. However, sometimes lenders are more willing to work with someone who has bad credit if they’re able to put down a sizeable portion of cash toward the purchase of a home. Typically, this means having a down payment of about 20% of a home’s purchase price.
3. Have a Co-signer or Guarantor
If you have bad credit, you can consider asking a trusted friend or family member with good credit to be a co-signer or guarantor. This is a big request and shouldn’t be made lightly. Many people aren’t comfortable taking on the additional risk and responsibility to cover someone else’s mortgage. To get approved with a co-signer, there’s no specific credit score you need; it’s more based on the co-signer’s credit score than yours. Paying off the loan helps your credit score as well when you make on-time payments.
A co-signer is someone who signs all mortgage documents, and their name will appear on the home’s title, alongside the purchaser. They essentially co-own the home, and if mortgage payments aren’t made, the co-signer is held responsible. A guarantor doesn’t appear on the home’s title, but they’re held responsible if mortgage payments aren’t made.
How to get a Mortgage with Bad Credit in Canada
If you have bad credit or no credit, buying a home will be challenging. Even if you explore some of the other options available to you, such as private lenders or asking a family member to be a co-signer, you might face an uphill battle.
The best thing you can do if you have bad credit or no credit is to begin building good credit habits right away by following some of these tips.
1. Don’t Miss Payments
Your payment history is the biggest contributor to your credit score. If you’re in the habit of frequently missing payments on your credit cards or other loans, your credit score will be impacted. Make a plan to always pay your bills on time, even if it means cutting some spending or services, or working with your lenders to make bill payment dates more manageable.
2. Limit your Credit Spending
Another major factor in how your credit score is calculated is the percentage of revolving credit you’re using that’s available to you. For instance, if you have a credit limit of 10,000 dollars and you’re regularly maxing out your cards, your credit score will take a hit. Instead, limit your credit spending so that you’re only ever using under 35% of the credit available to you.
3. Sign up for a Credit-Building Program
One of the simplest ways to build up good credit is to use an online credit-building service. These services specialize in helping you build and maintain good credit. With one of these services, the goal is to put a track record of consistently making on-time payments on your credit report. Once you’ve signed up, you’re required to make small, manageable payments over time, and each payment is directly reported to the credit bureaus.
4. Consider a Secured Credit Card
Similarly, a secured credit card is another smart way to build credit quickly. When you apply and sign up, you pay the card’s maximum limit as a cash deposit, so you’re not really borrowing additional credit, and there’s no risk to the credit card issuer. You can then use the credit card as you normally would. As long as you’re making the payments on time, you’ll be building good credit one payment at a time.
Will a Mortgage Pre-Approval Hurt Your Credit Score?
When you apply for a home loan, a mortgage pre-approval can impact your credit score. This is because most formal pre-approvals require hard credit inquiries. While some online pre-qualification calculators will only do a soft inquiry, an official mortgage approval from a bank will require a hard inquiry.
How the Mortgage Stress Test Works
When you apply for a mortgage, one thing that lenders use to determine your eligibility is the mortgage stress test. They’ll test your income and total debt service against whichever number is higher:
- The regulatory floor rate of 5.25%
- Your contracted mortgage interest rate plus 2%
This test applies to new home purchases, even those with larger down payments, home refinances, taking out HELOCs, and switching to a new lender at renewal (in some cases).
What Are GDS and TDS Ratios?
GDS and TDS are part of the mortgage stress test lenders use.
Gross Debt Service Ratio (GDS Ratio): For this ratio, your proposed housing costs must be under 39% of your gross household income. This includes your mortgage principal and interest, utility costs, property taxes, and 50% of condo fees.
Total Debt Service Ratio (TDS Ratio): For this ratio, your housing costs, as well as all other debt payments, must be under 44% of your gross household income. This includes car loans and credit card balances.
Do Lenders Prefer to Use Equifax or TransUnion for Mortgages?
When you begin house hunting as a first-time home buyer, it’s important to keep in mind that there are different lender types and financing options available. The lender you choose will also determine which credit reporting agencies your credit is checked with.
Most major Canadian banks will start by checking your credit score with Equifax Canada. However, for many, this might only show a portion of your credit mix, credit accounts, and current available credit. As a result, some lenders may choose to check your TransUnion credit score, or even both.
Can Newcomers Get a Mortgage Without Canadian Credit History?
As a newcomer to Canada with a limited credit history, you don’t have to look for bad credit mortgages to get approved. Many lenders offer specialized newcomer mortgage programs designed for those who have recently arrived in the country.
Many lenders and mortgage insurers, like the Canada Mortgage and Housing Corporation or Canada Guaranty Mortgage Insurance Company, also consider other factors, like:
- International credit reports from your home country.
- Bank reference letters from your financial institution outside of Canada.
- Alternative proof of payment, such as 12 months of monthly housing costs and credit card bills.
- Employment and proof of income for work in Canada.
How Much Does Your Credit Score Change Your Mortgage Rate?
Whether you have a low credit score or a good credit score can affect whether you get the lowest mortgage rates or not. Your credit score can also affect the amortization period and your mortgage term.
This is because lenders use your credit score to determine your default risk. Those with a higher score are considered to be low risk. Those who are low risk often get the best interest rates, which can get you lower monthly payments.
Insured Mortgages Vs. Uninsured Mortgages
In Canada, you can get either insured mortgages or uninsured mortgages. Mortgages with mortgage insurance, also known as mortgage default insurance, have different down payment requirements; uninsured mortgages require a 20% down payment.
For insured mortgages in Canada, you only need a down payment of:
- 5% for the first $500,000
- 10% on amounts from $500,000 to $1,499,999
- 20% on all purchase prices of $1,500,000 and higher
Before you decide whether or not to go with an insured mortgage, it’s best to talk to a financial advisor. The maximum amortization is capped at 25 years for most mortgages, and fees must be paid. However, with an uninsured mortgage, you have to make a larger down payment.
Mortgage Options for Self-Employed Borrowers With a Low Credit Score
Having a good credit score isn’t the only factor that impacts your mortgage rates and mortgage approval. How much debt you have and whether you have any new loans are also key factors in deciding your loan terms and whether you qualify for more debt. How much income you earn and how you earn it are also important.
For this reason, it can be much more difficult for self-employed individuals to get mortgages. This is especially true for those who have a low credit score. At major banks and credit unions, you need a minimum credit score of around 680. With private lenders and b-lenders, you have a much better chance of approval without improving your credit score.
