Lead pre-qualification

Pre-qual vs pre-approval — they're different

This is a pre-qualification — a fast back-of-envelope sizing exercise to set realistic expectations. It uses self-reported income, debt, and down payment to estimate a price ceiling. Pre-approval is the formal process: full application, credit pull, income verification, employment letter, and a rate hold from a specific lender (typically 90–120 days).

Brokers use pre-qual at the discovery stage; pre-approval is what gets a client ready to write offers.

Three credit tiers — what each costs

• A-tier (680+ beacon, clean file): bank pricing, typical 5-year fixed at posted minus 1.5–2.5%. Most files.
• B-tier (600–679, or A-tier with file issue): alt-A pricing, +1–2% above A. Lender fees common (0.5–1.5%).
• Private (sub-600, derogatory credit, very-short-tenure self-employed): 8–14% rates, 1–3% lender fees, 1–2 year terms. Bridge financing only.

How the pre-qual math works

The calculator runs a simplified version of the OSFI B-20 stress test:

1. Qualifying rate = max(contract + 2%, 5.25%)
2. Monthly income = annual ÷ 12
3. GDS cap: 39% × monthly income
4. TDS cap: 44% × monthly income − other monthly debts
5. Shelter budget = lesser of GDS or TDS limit
6. Mortgage P&I budget = shelter budget − ~$250 (rough property tax + heat allowance)
7. Max mortgage = PV of P&I budget at qualifying rate, 25-year amortization
8. Max purchase = max mortgage + down payment

The full affordability calculator uses real property tax + heating + condo fee inputs and produces a more precise number.

What to actually verify before pre-approval

• Credit report (Equifax + TransUnion) — pull both, look for discrepancies, address before applying
• Income docs: 2 years of T4s + most recent NOA + Letter of Employment for salaried; 2 years of T1 General + T2125 + business financials for BFS
• Down payment source + 90-day history: bank statements showing accumulation
• Existing debt confirmation: balances on cards / LOC / car loan / student loan
• Lease or mortgage statement for current housing
• Status of any current real estate: confirmation of sold + closing date if applicable

Verdict bands — what they mean for a buyer

• Excellent qualifier ($800k+): comfortably in the A-tier prime market, multiple lender options, best rates available
• Solid qualifier ($500k–$800k): still A-tier, full bank access; price range covers most starter homes in mid-tier Canadian markets
• Moderate qualifier ($300k–$500k): A-tier with some lender restrictions; consider increasing down payment or paying down debt to lift the ceiling
• Limited qualifier (under $300k): review credit, income, or debt issues; B-tier may be necessary if file can't be improved

Ways to lift a client's qualifying ceiling

• Pay down debt — at this lead's 6.89% qualifying rate, every $300 a month of debt payments removed adds about $43,000 of mortgage capacity
• Add a co-signer — see co-signer impact calc
• Increase down payment — every $10k extra reduces the mortgage 1:1
• Document additional income — overtime, bonus, rental income with the right history
• Look at provincially regulated lenders — credit unions are not bound by OSFI's B-20 and some use their own qualifying standard
• Use a 30-year amortization — since December 15, 2024, insured mortgages can run 30 years for every first-time buyer and for anyone buying a newly built home (with a 0.20% insurance premium surcharge); many lenders also offer 30 years on uninsured mortgages. This calculator sizes on 25 years, so a 30-year file qualifies for more

Related

• Full affordability
• Pre-approval amount
• Stress test impact
• Co-signer impact
• Credit score impact
• Mortgage broker commission calculator