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Important Factors Mortgage Lenders Use to Determine Your Mortgage Amount

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  • Last Updated: January 13, 2026
Important Factors Mortgage Lenders Use to Determine Your Mortgage Amount

Important Factors Mortgage Lenders Use to Determine Your Mortgage Amount

If you have ever wondered why one lender says you qualify for one amount and another lender says something totally different, you are not alone. Many Canadians assume a mortgage amount is based on income alone. Income matters, but it is only one part of the qualification equation.

Mortgage lenders are trying to answer two simple questions:

  1. Can you afford the payments, even if rates rise or life gets more expensive

  2. Are you likely to repay the mortgage on time for the full term

To answer those questions, lenders look at a combination of income, debts, credit, down payment, property details, and the rules that apply to your type of mortgage. Below are the nine biggest factors that determine your mortgage amount, written in a practical way you can use to estimate your own approval range and strengthen an application.

1. Your income and how predictable it is

Income is the foundation of the mortgage amount calculation, but not all income is treated the same.

What lenders like

  • Salary or hourly income with consistent pay stubs

  • Long-term employment in the same field

  • Clear proof of income through standard documents

Income types lenders review differently

  • Commission or bonus income: usually averaged over a period of time and may require a longer history

  • Overtime: sometimes included, sometimes partially included, often averaged

  • Self-employed income: commonly based on 2-year averages of taxable income, with extra scrutiny on business stability

  • Rental income: often only a portion is counted, depending on the lender and the type of property

  • Child support or spousal support: may be considered if it is documented, consistent, and likely to continue

What this means for your mortgage amount: two people earning the same gross income can qualify for different mortgages if one has stable salary income and the other has variable income that is harder to document.

Practical tip: If your income varies, gather documents that show stability. T4s, Notices of Assessment, consistent deposits, and an employment letter can make a huge difference.

2. Your debt-to-income ratios (GDS and TDS)

This is one of the biggest drivers of your mortgage amount. Lenders use affordability formulas called debt service ratios to calculate whether your monthly obligations are reasonable compared with your income.

GDS (Gross Debt Service)

This ratio compares your housing costs to your gross income. Housing costs typically include:

  • Mortgage payment (calculated at a qualifying rate, not always your contract rate)

  • Property taxes

  • Heating costs (and sometimes condo fees, if applicable)

TDS (Total Debt Service)

This ratio adds your other monthly debts, such as:

  • Credit card minimum payments

  • Car loans and leases

  • Lines of credit

  • Student loans

  • Child or spousal support payments

  • Any other fixed monthly obligations

In plain language: your mortgage amount is limited by the monthly payment you can carry after factoring in the rest of your financial life.

Practical tip: If you want to increase the mortgage amount you qualify for, paying off or paying down monthly debt is often the fastest lever you can pull.

3. Your credit score and credit history

Credit is not only about the number. Lenders also care about the story behind it.

What lenders look at

  • Credit score (often both applicants)

  • Payment history (late payments can hurt more than people realize)

  • Utilization (how much of your credit you use compared with your limits)

  • Length of credit history

  • Mix of credit (cards, loans, installment accounts)

  • Recent credit inquiries and new accounts

A strong credit profile can:

  • Improve approval odds

  • Unlock better pricing

  • Reduce the risk premium a lender builds into their decision

  • Increase flexibility on ratios in some situations, especially with alternative lenders

A weaker credit profile can:

  • Reduce the maximum mortgage amount

  • Trigger stricter ratio requirements

  • Require a larger down payment

  • Shift you toward an alternative lender, even if your income is solid

Practical tip: If you are planning a purchase or refinance, avoid applying for multiple new credit accounts within the months leading up to your mortgage application.

4. Your down payment (or equity, if refinancing)

Your down payment affects the mortgage amount in two ways:

  1. It changes the loan size needed to complete the purchase

  2. It influences the lender’s risk, which affects rules and qualification

Why down payment matters

  • A larger down payment reduces the loan-to-value ratio (LTV)

  • Lower LTV generally means lower lender risk

  • Lower risk often means better rates and more lender options

If you are refinancing, the “down payment” equivalent is equity. Lenders will look at how much you owe compared with what the property is worth and apply maximum LTV rules depending on the product.

Practical tip: If you are just short of a down payment threshold, small changes can matter. A slightly larger down payment can open better lender categories and reduce insurance or pricing costs.

5. The mortgage stress test and the qualifying rate

Many borrowers are surprised to learn the lender often qualifies them at a higher rate than what they are actually getting.

This is designed to test whether you could still handle the payments if interest rates increase. The practical effect is that your mortgage amount can be lower than you expected, especially when rates are higher.

Why this matters:

  • Two borrowers with the same income and debts can qualify for different mortgage amounts depending on the qualifying rate environment

  • Small rate changes can have an outsized impact on maximum approval amounts

Practical tip: If you are trying to maximize borrowing, improving your debt ratios and boosting your down payment often matters more than shopping rate alone.

6. The property type, location, and marketability

Lenders are lending against a property, not just a person. If the property is harder to sell, harder to value, or riskier in the lender’s view, the lender may reduce the mortgage amount or require different terms.

Examples that can affect mortgage amount:

  • Rural properties with limited comparable sales

  • Unique homes that are difficult to appraise

  • Condos with high fees or building issues

  • Properties with rental suites or non-standard zoning

  • Homes in declining markets or with restricted demand

  • Short-term rental reliance for income

In many cases, the lender’s appraisal becomes a limiting factor. If the appraisal value comes in lower than expected, your maximum mortgage amount may drop even if your income supports more.

Practical tip: If you are buying, build a buffer in your budget in case appraisal comes in lower. If you are refinancing, be conservative with your expected value until an appraisal confirms it.

7. Your employment profile and time in the job

Even with good income, lenders want confidence that the income will continue.

Common lender questions:

  • Are you on probation?

  • Is your role permanent or contract?

  • Have you been in the industry for a while?

  • Is your income stable month to month?

  • Are you switching industries or moving from salary to self-employment?

Someone who just started a new job can sometimes qualify, but the lender may:

  • Ask for additional documents

  • Require a firm employment letter confirming permanent status and income

  • Be cautious if probation is still in place

Practical tip: If possible, avoid major job changes right before closing. If a change is necessary, ensure you have clear documentation and continuity in the same field.

8. Your existing debts and monthly payment obligations

This overlaps with ratios, but it is worth calling out because people often focus on total debt balances rather than monthly payments.

Lenders care about the monthly obligations because those payments compete with your future mortgage payment.

Some common mortgage amount killers:

  • Car payments (especially leases)

  • Large line of credit payments

  • High credit card minimums due to utilization

  • Student loan payments

  • Support obligations

Practical tip: If you are trying to qualify for a higher mortgage amount, consider restructuring debts to reduce monthly payments. Sometimes consolidating high-payment debt into a lower-payment structure can improve TDS enough to increase approval room.

9. The lender’s guidelines and the mortgage product you choose

Two lenders can evaluate the same application and approve different mortgage amounts because their policies are not identical.

Differences can include:

  • How they treat bonus and commission income

  • How they count rental income

  • Maximum ratios allowed

  • Minimum credit score requirements

  • Property restrictions

  • Maximum amortization based on your situation

  • Flexibility with exceptions

Also, the type of mortgage you choose matters:

  • Insured versus uninsured

  • Fixed versus variable

  • Standard versus alternative lending

  • Purchase versus refinance

  • Owner-occupied versus rental

Practical tip: If you are near the edge of qualification, having access to multiple lenders can change the result. Strategy matters as much as math.

A simple way to estimate your mortgage amount range

While lenders use detailed calculations, you can do a rough estimate using a few steps:

  1. Add up your monthly debts (car loan, credit cards, lines of credit, student loans, support, etc.)

  2. Estimate monthly housing costs (property taxes, heating, condo fees if applicable)

  3. Compare those totals to your gross monthly income

  4. If your ratios feel tight, reduce monthly debt payments or increase down payment before assuming you need to give up on the goal

This is not a replacement for a proper pre-approval, but it helps you see which lever matters most for your situation.

How to increase the mortgage amount you qualify for

If your approval amount is lower than you want, here are practical levers that usually move the needle:

  • Pay off or pay down monthly debts: reducing monthly payments often increases mortgage room quickly

  • Increase down payment or equity: lowers risk and can improve pricing and approval flexibility

  • Improve credit utilization: paying down revolving balances can lift scores and reduce minimum payments

  • Add a co-borrower: increases household income and can improve ratios

  • Choose a longer amortization (when allowed): lowers payment, improves ratios, increases qualification

  • Use an alternate lender strategy: for self-employed, credit challenges, or unique income structures, an alternative program may provide a higher approval amount

FAQ: How Lenders Determine Your Mortgage Amount

How do mortgage lenders calculate how much I can borrow?

They look at your income, your debts, your credit history, your down payment or equity, and the property details. A key part of the calculation is your debt service ratios, which measure whether your monthly obligations are reasonable compared with your income.

Is my mortgage amount based only on my income?

No. Income is important, but lenders also factor in your monthly debts, credit profile, down payment, property taxes, heating costs, condo fees (if any), and qualification rules like the stress test.

What lowers the mortgage amount I qualify for the most?

High monthly debt payments are a common reason. Car payments, high credit card minimums, and large lines of credit can reduce your borrowing power quickly because they raise your total debt service ratio.

Does my credit score affect the mortgage amount or just the rate?

It can affect both. Strong credit can improve lender options and sometimes allows more flexibility. Weak credit can lead to stricter guidelines, reduced approval amounts, or a shift to alternative lending.

Why did the appraisal reduce how much I can borrow?

If the appraisal value is lower than expected, the lender will base the mortgage amount on the appraised value, not the purchase price or your estimate. This can reduce the maximum loan size even if your income supports more.

Can self-employed borrowers qualify for the same mortgage amount as salaried borrowers?

Yes, but documentation is usually stricter and income may be averaged over time. Some programs focus on traditional taxable income, while others may consider different ways to validate earnings depending on the lender.

Does paying off debt increase my mortgage approval amount?

Often, yes. Reducing monthly debt payments can improve your ratios and increase the mortgage amount you qualify for. Even paying down revolving credit can help by lowering minimum payments and improving utilization.

What is the fastest way to increase how much mortgage I qualify for?

For many borrowers, it is a combination of lowering monthly debt payments and increasing down payment. Improving credit utilization can also help surprisingly fast.

Quick conclusion

If your mortgage amount feels unclear or lower than expected, you do not have to guess your way through it. LendToday can review your income, debts, credit, and down payment, then match you with the right lender strategy to help you maximize what you qualify for. If you are buying, refinancing, or consolidating debt, reach out today for a quick review and a clear next step based on your numbers.

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