Boosting Mortgage Approval Chances After Denial

Joel Olson • January 27, 2025

Getting turned down for a mortgage can feel like a major setback, but it doesn't have to be the end of your homeownership journey. Understanding why your application was rejected is the first crucial step in moving forward. Lenders typically deny applications due to common issues like credit score problems, inadequate income, or high debt levels.


Once you know where you stand, it’s time to roll up your sleeves and work on strengthening your financial profile. This involves not just addressing credit concerns but also getting a handle on your overall finances. Crafting a realistic budget and sticking to it can help you present a more appealing picture to lenders when you reapply.


Besides banks, several other avenues can lead you towards securing a mortgage. Non-traditional lenders and government programs in Canada offer real opportunities for those willing to explore them. Focusing on these options can open doors that might seem closed for now, allowing you to take proactive steps toward owning your dream home.


Understanding Your Mortgage Denial


Facing a denial can be discouraging, but understanding the reasons behind it is key to making improvements. Common issues that lead to mortgage rejections include poor credit scores, insufficient income, and high debt levels. Credit scores play a significant role in how lenders perceive risk. A low score can indicate poor payment history or excessive debt usage, both red flags for lenders. Similarly, if your income doesn't meet the lender's threshold or if you have large outstanding debts, your application can be jeopardized.


Reviewing feedback from the lender is vital. This feedback provides insight into specific areas that need attention. Maybe it’s about increasing your income or tackling some debts. Lenders may provide advice or indicate what changes might make your application more favourable in the future. Understanding their criteria better equips you to address them effectively.


Lenders often look at additional factors like employment stability and down payment size. Addressing these areas can create a stronger profile. Understanding where you fell short matters because it directs your efforts towards the right solutions. By focusing on these specific areas, you can prepare yourself better for future applications, helping you get closer to securing the mortgage you need.


Strengthening Your Financial Profile


Improving your financial profile is essential for increasing your approval odds. Start by enhancing your credit score. Manage this by paying bills on time, reducing your outstanding balances, and refraining from opening new credit accounts right before applying again. Regularly check your credit report for errors, as correcting mistakes can lead to a quick score boost.


Another vital strategy is reducing your debt. High debts make lenders wary, so focus on paying down credit cards and loans. Create a repayment plan that prioritizes higher interest debts first. A lower debt-to-income ratio can significantly impact your application's success positively.


Organizing your financial documents is equally important. Ensure you have recent pay stubs, bank statements, and tax returns readily available. This organization showcases your financial stability and readiness to potential lenders.


Additionally, setting up a realistic budget can help you manage your finances better. Identify your essential expenses, cut back on unnecessary spending, and allocate more towards savings and debt repayment. Keeping a budget not only assists in financial management but also demonstrates to lenders that you have control over your finances.


Improving these aspects of your profile can strengthen your application considerably, making you a more attractive candidate for mortgage lenders.


Exploring Alternative Lending Options


If traditional banks are not an option, non-traditional lenders can serve as a valuable alternative. Credit unions, private lenders, and online mortgage companies often provide more flexible lending criteria. Credit unions, for example, are member-focused organizations that may offer personalized services and competitive rates. They might look at your overall financial picture rather than sticking strictly to credit scores.


Private lenders are another option, usually catering to those with unique financial situations. These lenders often approve applications quicker and with fewer requirements. However, it's important to note that private loans may come with higher interest rates. Online mortgage companies streamline their processes through digital platforms, making application procedures more straightforward and potentially faster.


When choosing non-traditional lenders, understanding the differences is crucial. While banks may offer lower rates, non-traditional lenders can provide more leeway in approval processes. Consider the interest rates, fees, and terms carefully. While these alternative lenders can increase your chances of approval, it’s essential to compare all your choices and ensure the offer benefits your specific needs.


Utilizing Supportive Programs and Resources


The Canadian government offers several programs designed to support homebuyers, providing another avenue to explore after a mortgage denial. The First-Time Home Buyer Incentive helps Canadians lower their monthly payments without interest, making it easier to afford a home. Eligible buyers can apply for a shared-equity mortgage, where the government contributes a portion of the home’s purchase price.


Another helpful program is the Home Buyers' Plan, which allows Canadians to withdraw from their Registered Retirement Savings Plans (RRSPs) to buy or build a qualifying home. This program offers an opportunity to make a down payment more manageable without the added burden of long-term financial strain.


Working with mortgage experts can further enhance your strategy for approval. Professionals can guide you through the intricacies of these programs and find the best fit for your situation. They can also assist in preparing your financial profile to meet necessary requirements, ensuring a smoother application process.


Navigating a mortgage denial requires persistence and creativity. By understanding the reasons for rejection, improving your financial profile, exploring alternative lenders, and utilizing supportive programs, you can significantly improve your chances of success. Each step you take brings you closer to achieving your goal of homeownership.


At the Joel Olson Mortgage Team, we understand that mortgage solutions aren't one-size-fits-all. Our experienced mortgage brokers in BC, Canada, are dedicated to helping you find the best path forward. Whether you're seeking to improve your credit, explore new lenders, or capitalize on government programs, we're here to support your journey. Contact us today and let us help you turn denials into opportunities on your path to owning a home.

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An Overview of the Home Buying Process

By Joel Olson • June 3, 2025
If you’re in the early stages of planning to buy either your first home or your next home, you’ve come to the right place! Even if you’ve been through it before, the home buying process can be daunting, but it doesn’t have to be when you have the right people on your side! The purpose of this article is to share a high-level view of the home buying process. Obviously, the finer details can be addressed once you’ve submitted an application for pre-approval. But for now, here are some of the answers to general questions you may have as you work through your early preparations. Are you credit-worthy? Having an established credit profile is essential when applying for a mortgage. For your credit to be considered established, you’ll want to have a minimum of two trade lines (credit cards, loans, or lines of credit) with a minimum limit of $2500, reporting for a period of at least two years. From there, you’ll want to make sure that your debt repayment is as close to flawless as possible. Think of it this way: Why would a lender want to lend you money if you don’t have a history of timely repayment on the loans you already have? Making your payments on time, as agreed, is crucial. We all know, however, that mistakes can happen and payments might get missed. If that's the case, it’s best to catch up as quickly as possible! Late payments only register on your credit report if you're past due by 30 days. How will you make your mortgage payments? When providing you with a mortgage, lenders are trusting you with a lot of money. They'll want to feel really good about your ability to pay that money back, over an agreed period of time, with interest. The more stable your employment, the better chances you have of securing mortgage financing. Typically, you’ll want to be employed in a permanent position or have your income averaged over a period of two years. If you’re self-employed, expect to provide a lot more documentation to substantiate your income. How much skin do you have in the game? If you're borrowing money to buy a home, you’re going to have to bring some money to the table. The best down payment comes from accumulating your own funds supported by documents proving a 90-day history in your bank account. Other down payment sources, such as a gift from a family member or proceeds from another property sale, are completely acceptable. In Canada, 5% down is the minimum requirement. However, depending on the purchase price, it might be more. Also, you need to be aware that you will likely have to prove access to at least 1.5% of the purchase price to be allocated for closing costs. How much can you afford? Here’s the thing. What you can afford on paper and what you can afford in real life are often very different amounts. Just because you feel you can afford the proposed mortgage payments, know that you will have to substantiate everything through documentation. The amount you actually qualify to borrow is based on many factors, certainly too many to list in an article designed to provide you with an overview of the home buying process. However, with that said, it’s never too early in the home buying process to seek professional advice. Our services come at no cost to you; it would be our pleasure to help. Working with an independent mortgage professional will allow you to assess your credit-worthiness, provide insight on how a lender will view your income, help you plan for a down payment, and nail down exactly how much you can afford to borrow. And if you need help putting together a plan to improve your financial situation, we can do that too. If you’d like to discuss your financial situation and put together a plan to secure mortgage financing, please get in touch!

GDS/TDS Ratios Explained

By Joel Olson • May 20, 2025
One of the major qualifiers lenders look at when considering your application for mortgage financing is your debt service ratios. Now, before we get started, if you prefer to have someone walk through these calculations with you, assess your financial situation, and let you know exactly where you stand, let’s connect. There is no use in dusting off the calculator and running the numbers yourself when we can do it for you! However, if you’re someone who likes to know the nitty-gritty of how things work instead of simply accepting that's just the way it is, this article is for you. But be warned, there are a lot of mortgage words and some math ahead; with that out of the way, let’s get started! “Debt servicing” is the measure of your ability to meet all of your financial obligations. There are two ratios that lenders examine to determine whether you can debt service a mortgage. The first is called the “gross debt service” ratio, or GDS, which is the percentage of your monthly household income that covers your housing costs. The second is called the “total debt service” ratio, or TDS, which is the percentage of your monthly household income covering your housing costs and all your other debts. GDS is your income compared to the cost of financing the mortgage, including your proposed mortgage payments (principal and interest), property taxes, and heat (PITH), plus a percentage of your condo fees (if applicable). Here’s how to calculate your GDS. Principal + Interest + Taxes + Heat / Gross Annual Income Your TDS is your income compared to your GDS plus the payments made to service any existing debts. Debts include car loans, line of credit, credit card payments, support payments, student loans, and anywhere else you’re contractually obligated to make payments. Here’s how to calculate your TDS. Principal + Interest + Taxes + Heat + Other Debts / Gross Annual Income With the calculations for those ratios in place, the next step is to understand that each lender has guidelines that outline a maximum GDS/TDS. Exceeding these guidelines will result in your mortgage application being declined, so the lower your GDS/TDS, the better. If you don’t have any outstanding debts, your GDS and TDS will be the same number. This is a good thing! The maximum ratios vary for conventional mortgage financing based on the lender and mortgage product being offered. However, if your mortgage is high ratio and mortgage default insurance is required, the maximum GDS is 39% with a maximum TDS of 44%. So how does this play out in real life? Well, let’s say you’re currently looking to purchase a property with a payment of $1700/mth (PITH), and your total annual household income is $90,000 ($7500/mth). The calculations would be $1700 divided by $7500, which equals 0.227, giving you a gross debt service ratio of 22.7%. A point of clarity here. When calculating the principal and interest portion of the payment, the Government of Canada has instituted a stress test. It requires you to qualify using the government's qualifying rate (which is higher), not the actual contract rate. This is true for both fixed and variable rate mortgages. Now let’s continue with the scenario. Let’s say that in addition to the payments required to service the property, you have a car payment of $300/mth, child support payments of $500/mth, and between your credit cards and line of credit, you’re responsible for another $700/mth. In total, you pay $1500/mth. So when you add in the $1700/mth PITH, you arrive at a total of $3200/mth for all of your financial obligations. $3200 divided by $7500 equals 0.427, giving you a total debt service ratio of 42.7%. Here’s where it gets interesting. Based on your GDS alone, you can easily afford the property. But when you factor in all your other expenses, the TDS exceeds the allowable limit of 42% (for an insured mortgage anyway). So why does this matter? Well, as it stands, you wouldn’t qualify for the mortgage, even though you are likely paying more than $1700/mth in rent. So then, to qualify, it might be as simple as shuffling some of your debt to lower payments. Or maybe you have 10% of the purchase price saved for a downpayment, changing the mortgage structure to 5% down and using the additional 5% to pay out a portion of your debt might be the difference you need to bring it all together. Here’s the thing, as your actual financial situation is most likely different than the one above, working with an independent mortgage professional is the best way to give yourself options. Don’t do this alone. Your best plan is to seek and rely on the advice provided by an experienced independent mortgage professional. While you might secure a handful of mortgages over your lifetime, we do this every day with people just like you. It’s never too early to start the conversation about mortgage qualification. Going over your application and assessing your debt service ratios in detail beforehand gives you the time needed to make the financial moves necessary to put yourself in the best financial position. So if you find yourself questioning what you can afford or if you want to discuss your GDS/TDS ratios to understand the mortgage process a little better, please get in touch. It would be a pleasure to work with you, we can get a preapproval started right away.