Blog > Mortgage Requirements in BC: Income, Debt Ratios & Borrowed Down Payments Explained

Income & Debt-Servicing Requirements for a Mortgage in BC: What First-Time Home Buyers, New-to-Canada Clients & Business-for-Self Borrowers Need to Know

If you’re a first-time home buyer in BC, a new immigrant to Canada, or a business-for-self borrower exploring the possibility of borrowing a down payment, understanding traditional lender requirements is essential. As a mortgage broker specializing in helping clients navigate Canada’s lending landscape, I’m here to break down exactly what income documentation and debt-servicing ratios lenders look for when approving a mortgage.

What Income Do Traditional Lenders Require for a Mortgage in Canada?

Traditional lenders (major banks, credit unions, and monoline lenders) rely on verifiable, consistent income sources to determine how much mortgage you can qualify for. The type of income you earn affects the documentation required.

1. Salary & Hourly Employees

Lenders favour predictable income. To qualify with employment income, you’ll typically need:

• Recent pay stub (last 30 days)
• Letter of employment confirming salary, start date, and hours
• Past 2 years of T4s

Hourly employees may have their hours averaged over the last 24 months, unless your hours are guaranteed in your employment letter.

2. Commission, Bonus & Overtime Income

If your income varies, lenders require:

• Two years of T1 General tax returns
• Two years of CRA Notices of Assessment
• Employer confirmation of variable income

Lenders will typically average the last two years. If year 2 is lower, the lowest number is often used.

3. Business-for-Self / Self-Employed Borrowers

Self-employed clients often assume they can’t qualify — but you absolutely can. You just need the right documentation.

Traditional lenders usually require:

• 2 years of full T1 Generals
• 2 years of NOAs
• Business financial statements (if incorporated)
• Proof the business is active (website, license, invoices, GST filings)

Most lenders use a 2-year average of your net taxable income to calculate your mortgage approval.

If your taxable income is lower due to deductions, there are also mortgage solutions that use bank statements, add-backs, and reasonable income interpretations.

Debt-Servicing Requirements: How Lenders Calculate Your Mortgage Affordability

Every mortgage in Canada must pass debt-servicing rules defined by federal lending guidelines. These ratios determine your borrowing limit.

1. Gross Debt Service Ratio (GDS)

GDS includes your basic housing expenses:

• Mortgage payment (calculated using the stress test rate)
• Property taxes
• Heating costs
• 50% of strata fees (if applicable)

Traditional lenders require:

• GDS ≤ 39% with strong credit (680+)
• GDS ≤ 35% with lower credit scores

2. Total Debt Service Ratio (TDS)

TDS includes all monthly debt obligations:

• Housing expenses
• Car payments
• Student loans
• Credit cards and lines of credit
• Personal loans
• Borrowed down-payment repayment
• Other recurring obligations

Traditional lenders require:

• TDS ≤ 44% with strong credit
• TDS ≤ 42% with lower credit

Can You Borrow Your Down Payment? Yes — With Conditions

Many first-time home buyers in BC are surprised to learn that some traditional lenders allow borrowed down payments. However, strict rules apply.

Acceptable borrowed down payment sources include:

• Personal line of credit
• Personal loan
• Credit card (only if repayment fits ratios)
• RRSP under the Home Buyers’ Plan (not considered borrowed)
• Gifted funds from immediate family

Important:

The monthly payment for the borrowed amount is included in your TDS ratio, which reduces your mortgage qualification.

Requirements for First-Time Home Buyers in BC

Traditional lenders often look for:

• Stable income (2-year history preferred)
• Good credit score (680+ recommended)
• Strong banking history
• Sufficient down payment (5%–20%)

You may also qualify for:

• First-Time Home Buyer Property Transfer Tax Exemption
• First Home Savings Account (FHSA)
• RRSP Home Buyers’ Plan (HBP)

Requirements for New-to-Canada Buyers

Lenders typically require:

• Permanent resident status or valid work permit
• 12–24 months of Canadian employment history
• Established credit (two active trade lines)

If you’re new and still building credit, some lenders accept foreign credit bureaus or alternative documentation such as:

• Rental history
• Utility payment history
• Bank statements showing consistent savings patterns

Requirements for Business-for-Self Home Buyers

To qualify with business income, lenders look for:

• 2 years of filed taxes
• Reasonable add-backs (amortization, vehicle expenses, non-recurring expenses)
• Consistent or growing income trends
• Strong credit and low personal debt

Self-employed buyers who plan ahead typically qualify for more favourable terms.

Final Thoughts: How to Make Lender Requirements Work for You

Qualifying for a mortgage in British Columbia depends on meeting traditional lender expectations around income verification and debt-servicing ratios. Whether you’re a first-time home buyer, a newcomer to Canada, or self-employed, the right preparation can significantly improve your approval chances — even if you’re exploring borrowed down payment options.

As a mortgage broker, my role is to review your income, credit, and goals, then match you with the lender best suited for your situation — including lenders with flexible programs for newcomers and self-employed borrowers.