To qualify for a mortgage, you must satisfy a lot of conditions to convince the lender that you will be responsible and capable in paying off that mortgage. It can be a rigorous process.

But, even if you are responsible and capable, there are certain things that may automatically disqualify you from a mortgage or at least push you below the qualifying threshold.

Some of these are obvious, like being in bankruptcy, having a low credit score or not having sufficient down payment. But there are many lesser-known items that may sink a person who might otherwise be well qualified for getting a mortgage.

Here are some of them:

  1. You haven’t had a sufficient lapse of time after clearing a Bankruptcy. After being discharged from a bankruptcy, you need a minimum of two years from the date of discharge before you can be considered for a mortgage. If real estate was included in the bankruptcy, you need a minimum of six years (i.e., until the bankruptcy falls off your record) regardless of whether you meet all other conditions. And, if it is a second bankruptcy, don’t even think of applying for a mortgage until 14 years have elapsed.
  2. You haven’t had a sufficient lapse of time after paying off a Consumer Proposal. A consumer proposal is treated much like a bankruptcy. Again, there is a minimum 2-year waiting period after having your proposal fully paid off, regardless of your other qualifications. Be cautious before filing a consumer proposal; the consequences aren’t always identified in advance.
  3. You have too much other debt. There is only a small room for other debt payments (5% of your gross monthly income) before those payments will reduce your ability to support a mortgage, and therefore the amount of mortgage for which you will qualify. If your other debt payments are greater than the allowable 5%, the mortgage payment amount for which you qualify is reduced by that overage.
  4. You have co-signed a loan or mortgage for someone else. If you have co-signed any loan, you are considered to be fully responsible for it, just like the other party. Therefore, the payment on that loan, even if the other party pays 100% of it, is counted as a monthly debt obligation to you in calculating the amount of mortgage for which you will qualify.
  5. You have mandated child support payments. These are debt obligations, just like any other, and will be counted against your ability to support a mortgage, limiting the amount for which you may qualify.
  6. You don’t have a credit card. You need a minimum of two credit lines on your credit file, and at least one of these must be a credit card. The other can be a second credit card, a vehicle loan, a line of credit, etc. Some people think that not having or using credit cards is a responsible way to go. Not so! Responsible use of a credit card is the best evidence available to a lender that you are an acceptable risk.
  7. Your two credit lines are too new. You need to have had those two qualifying credit lines for a minimum of two years before they demonstrate an acceptable history of responsible payment to warrant mortgage approval.
  8. You have a Collection on your credit report. Any collection must be paid off fully before you will be approved. Unlike that for a bankruptcy or consumer proposal, though, there is no minimum waiting period after payout, though the presence of the collection will still have a drag on your credit score until it falls off your report. The same holds true for a Judgement.
  9. You owe taxes to the Canada Revenue Agency. This will be an automatic decline until CRA is paid off in full. (Trust me, I know—I was once declined until I paid off the $14.00 that I was outstanding on my tax bill.) You will also likely be declined if you are not up to date in filing your taxes.
  10. You credit report shows late payments. Even one late payment within the preceding year may disqualify you from a mortgage.
  11. Your income is from self-employment, and you don’t have at least two years of income tax returns showing how much you earned from that self-employment.
  12. You don’t have an acceptable relationship with your co-applicant. Although any two or more people can buy an investment property together, that is not so for an insured mortgage on an owner-occupied property. The lenders will delve into the relationship of the co-applicants and may deny the mortgage if they are not satisfied with the arrangement.
  13. Your down payment doesn’t come from an acceptable source. Your down payment must come from your own savings or as a gift from a very restricted set of gifters (basically a spouse, parents, children or siblings). Alternatively, if you can show that the down payment has been in your bank account for a minimum of 90 days at the time of applying for a mortgage, lenders will generally not question its source, as it will be considered savings.
  14. One of you qualifies, but your co-applicant doesn’t. While several applicants can add their incomes and down payments together to qualify for a higher amount, in every other respect each applicant must fully qualify on their own.

If you have challenges in any of these areas, a rent 2 own program might be a good fit for you. It never hurts to check it out.