Why Your Pre-Approval Amount Might Be Lower Than You Expected

You’ve got a solid income, good credit, and not much debt—so why does your pre-approval feel underwhelming?

It’s a common situation. You punch some numbers into an online calculator and expect one thing, but when the actual pre-approval comes back, it’s thousands (or tens of thousands) lower than expected. Here’s why that happens.

Lenders Look at the Whole Picture

Your gross income is just one piece of the puzzle. Lenders also factor in:

Monthly debt payments (credit cards, car loans, lines of credit)
Property taxes and heating costs
Mortgage insurance (if putting less than 20% down)
Condo fees, if applicable
Current interest rates and stress test rates

It’s not just about what you earn—it’s about what you spend and what the property will cost to maintain.

[Click here to see what your real pre-approval amount might be]

The Stress Test Has a Big Impact

In Canada, you’re qualified based on a higher rate than you’ll actually pay—this is known as the mortgage stress test. Even if your contract rate is 4.79%, your application is tested at the greater of 5.25% or your actual rate plus 2%.

That reduces your buying power, even if you’re more than capable of making the real payments.

Property Taxes Matter More Than You’d Think

Two identical homes—same price, same layout—but one has higher property taxes. That can mean a lower pre-approval amount.

Lenders include property taxes in their calculations. If those numbers are high, it eats into your max budget.

Debt Adds Up Quickly

Even small monthly payments—like a $300 car loan or a $75 credit card minimum—can reduce your pre-approval by tens of thousands. Lenders use ratios to determine what you can afford, and any fixed debt payments take away from that.

If your pre-approval is lower than expected, the first place to look is your current monthly obligations.

[Click here to find out how debt affects your approval]

FAQ

Can I increase my pre-approval amount?
Yes—by reducing debt, increasing your down payment, or having a strong co-signer added to the file.

Do all lenders use the same formula?
Not exactly. While the stress test rules are consistent, some lenders have slightly different guidelines that can result in higher or lower approvals.

Will I be able to borrow more if rates drop?
Yes. Lower rates improve the numbers and help increase your max purchase price—especially when the stress test rate drops too.

Should I worry if my pre-approval is lower than expected?
Not necessarily. Sometimes a lower number just reflects a more conservative lender or an accurate look at your current finances. It’s still a great starting point.

Final Thoughts

A lower pre-approval doesn’t mean something’s wrong—it just means the lender is working within the guidelines. The key is understanding where the numbers come from and what you can do to improve them.

[Click here to go over your numbers and see what’s possible]