Getting mortgage-ready doesn’t have to be complicated. The earlier you prep your finances, the smoother the process. These four practical steps will help you feel confident and in control when it’s time to apply.
Reduce Your Debt
3 Strategies That Work:
- Consolidation Loan
Combine multiple debts into one with a lower interest rate and a single monthly payment. - Aggressive Repayment
Focus on one or two high-interest debts (like credit cards) and aim to pay them off within a short timeframe, such as six months. - Roll Debt Into Your Mortgage
If you’re refinancing or renewing, you may be able to consolidate high-interest debts into your mortgage through a debt consolidation mortgage, which can lower your interest rate and reduce monthly payments.
Tip
Less debt each month = more cash flow and higher mortgage approval chances.
Improve Your Credit Score
Your credit score is based on your payment history over the past seven years, and consistent on-time payments are key. If you’ve missed a payment, there are still ways to rebuild quickly.
Tips to Boost Your Score:
- Keep balances under 25% of your limit
Even if you pay your full balance monthly, carrying high balances can lower your score.
- Request higher credit limits (strategically)
Increasing your limit can improve your credit utilization ratio—just be sure not to increase your spending.
- Avoid maxing out credit lines
Keeping your usage below 25% across all accounts helps maintain a healthy score. - Hold at least two types of credit accounts
Having a mix—like a credit card plus a line of credit or loan—strengthens your credit file. One account alone may look “thin” even with a good score.
Tip
Your credit score hinges on consistent, on-time payments and low credit usage. Focus here to rebuild quickly and qualify for better mortgage rates.
Ensure Job Stability
Lenders want to see that your income is steady and dependable. If you’re planning a job change, it’s best to do so before applying for a mortgage and remain in your new role for at least three months.
What Lenders Look For:
- At least 3 months in your current job before applying
- Same industry move? A 1-month history may be okay
- Self-employed? You’ll need 2+ years of business history for most lenders
Tip
Stay in your current job at least three months before applying, or get your mortgage first if you plan to switch careers soon.
Save for a Larger Down Payment
The bigger your down payment, the smaller your mortgage and your monthly costs. It may also help you avoid CMHC insurance (if you hit 20% or more).
Common Down Payment Sources:
- Personal savings
Consider monthly automatic transfers to stay consistent and build your fund gradually. - Investments
You can use funds from TFSAs or withdraw from an RRSP under the First-Time Home Buyer Plan (HBP), which allows you to borrow up to $35,000 tax-free. - Family gift
Gifts from immediate family are allowed, but lenders will need a signed gift letter.
Lenders look more favorably on funds you’ve saved or invested yourself. Gifts from non-family members are rarely accepted and are often treated as loans, which can negatively affect your application.
Tip
Want to see how your down payment affects your monthly payments? Try our Mortgage Calculator to explore different scenarios.
Final Thoughts: Prep Now, Save Later
If you’re planning to make a move in the next 6 to 12 months, now is the time to get mortgage-ready.
Reducing debt, improving credit, maintaining steady income, and saving a solid down payment all work together to strengthen your application and lower your costs.
Starting early gives you more control and confidence when the time comes to apply.
About the Author
Paul Hudson is an award-winning mortgage broker with over 20 years of experience helping homebuyers in British Columbia secure the right mortgage for their dream home.
