Can a Mortgage Be Denied After Preapproval?

Yes — in Canada, a mortgage can absolutely be denied even after you’ve been pre-approved. A pre-approval is not a guarantee of final approval.

Here’s how it works and why it happens 👇

What a Mortgage Pre-Approval Really Means (Canada)

A pre-approval is a conditional assessment by a lender based on:

  • Your stated income

  • Credit score/credit report at that time

  • Estimated debts

  • Current lending rules and interest rates

It typically:

  • Locks in a rate for 90–120 days

  • Gives you a maximum purchase price

  • Is not fully underwritten

Final approval only happens after you have an accepted offer on a property.

Common Reasons a Mortgage Is Denied After Pre-Approval

1. Change in Your Financial Situation

Any of these can cause a denial:

  • Job loss or probationary employment

  • Reduced hours or income

  • Taking on new debt (car loan, line of credit, credit cards)

  • Missed or late payments

  • Lower credit score since pre-approval

📌 Lenders re-check everything before funding.

2. The Property Doesn’t Qualify

Even if you qualify, the property must too:

  • Appraisal comes in lower than purchase price

  • Condo has poor financials or too many rentals

  • Property is non-standard (rural, co-op, leasehold land)

  • Condition issues (structural, water damage, illegal units)

3. Income Can’t Be Verified

This is very common:

  • Employer won’t confirm income

  • Self-employed income doesn’t meet lender criteria

  • Bonuses/commission not accepted as stable

  • Recent job change without enough history

4. Stress Test Failure

Canada requires borrowers to pass the mortgage stress test:

  • You must qualify at the higher of:

    • Contract rate + 2%, or

    • The Bank of Canada qualifying rate

If rates rise or debts increase, you may fail the stress test at final approval.

5. Down Payment Issues

Problems include:

  • Source of funds can’t be verified

  • Gift letter missing or unacceptable

  • Borrowed down payment

  • Funds not in account long enough (typically 90 days)

6. Policy or Rate Changes

Even during a rate-hold period:

  • Lender underwriting rules can change

  • Insurer (CMHC / Sagan / Canada Guaranty) may decline

  • Property value limits or debt ratios change

How Common Is This?

It’s not rare, especially when:

  • Buyers stretch to the maximum pre-approved amount

  • Markets move quickly

  • Buyers make financial changes mid-process

How to Protect Yourself

✔ Don’t take on new debt
✔ Don’t change jobs (or ask first)
✔ Keep spending and credit stable
✔ Use a mortgage broker, not just a bank
✔ Include a financing condition in your offer
✔ Get the property reviewed early (especially condos)

Bottom Line

Pre-approval = permission to shop, not a promise to lend.
Final approval depends on you, the property, and current lending rules all lining up.

If you want, I can:

  • Explain differences between bank vs broker pre-approvals

  • Review common condo red flags

  • Walk through what underwriters actually look for

  • Help you assess risk before making an offer  .                                                                                         Just let me know! ELIAS JIRYIS.BROKER 



Jan 20, 2026