When the bank says no
A decline is a piece of information, not a verdict — and it almost always has a specific, nameable cause that the letter does not mention. This page sets out the five real reasons, what each one takes to fix, and roughly how long. Some of them are fixable this week.
What should I do if my mortgage application was declined?
Find out which of five things caused it: credit, the debt-service ratios at the the greater of the contract rate plus 2% and 5.25% qualifying rate, unverifiable income, an untraceable down payment, or the property. Each has a different fix and a different timeline, and some are resolved in days. A decline at one lender is not a decline everywhere — banks apply their own policy on top of the insurer rules, and they differ substantially.
The five reasons, and what each one takes
| What went wrong | What actually fixes it | Where the file goes |
|---|---|---|
| Credit score or a specific derogatory item | Identify the item, not the score. A single collection or a late payment that can be explained or corrected often moves a file back to an A-lender; a pattern does not. | A-lender with explanation, or B-lender |
| Ratios failed at the the greater of the contract rate plus 2% and 5.25% qualifying rate | Clear a monthly payment, lengthen the amortization, add a co-borrower, or move to a credit union that is not bound by the federal rule. | Credit union or B-lender |
| Income could not be verified in the form given | Self-employment, commission, seasonal, tip or rental income that a template misreads. The fix is usually documentation and lender choice, not a different product. | A-lender that reads it correctly |
| Down payment source could not be traced | 90 days of statements, a gift letter, or documentation of a sale or transfer. Unexplained deposits stop files. | Same lender, once documented |
| The property itself | Oil tank, wood stove, well and septic, a former mining area, a mini-home on leased land, or an appraisal below the price. Property problems are not credit problems. | A lender with the right appetite |
Note how many of these are not credit problems at all. In practice, a meaningful share of people who believe they have been declined for "bad credit" were declined for an untraceable deposit or a property condition — both of which are fixed with paperwork rather than with time.
After a bankruptcy or consumer proposal
This is one of the highest-anxiety questions in personal finance, and in Nova Scotia the search results for it are dominated by insolvency trustees rather than by anyone who arranges mortgages. So, plainly:
- A discharged bankruptcy or a fully performed consumer proposal does not permanently disqualify you. Lenders want the discharge or certificate of full performance, and then evidence of re-established credit.
- Re-established credit normally means two active trade lines — a credit card and a loan, or two cards — reporting for twelve to twenty-four months with no missed payments and modest balances. Start these the month after discharge, not the year after.
- Some alternative lenders will lend before that point, sometimes as soon as the proposal is discharged, at a higher rate and a lower loan-to-value. That can be the right call when the alternative is continuing to rent while the clock runs.
- An undischarged proposal is different. Some lenders will refinance to pay out a proposal in full from the proceeds, which both closes the insolvency and starts the credit-rebuilding clock immediately. Whether it is worth doing depends on the equity available against the 80% ceiling.
CRA arrears, judgments and collections
These are treated differently from ordinary credit damage, because they can attach to the property. The Canada Revenue Agency can register a lien, and a registered judgment sits on title — which is why most A-lenders will not proceed while either is outstanding, regardless of how good the rest of the file looks.
The usual solution is straightforward once you see it: the arrears are paid directly out of the mortgage proceeds at closing, as a condition of funding. The lender is not trusting you to pay them; the lawyer pays them before any funds reach you. That converts an unsolvable-looking problem into an ordinary refinance, provided the equity is there. A second mortgage does the same without breaking the first →
When the ratios are the problem, not the credit
In Nova Scotia the ratio that fails is usually total debt service rather than gross debt service, because prices here are moderate relative to the consumer debt people carry. TDS is capped at 44% and includes every monthly obligation — car loans, student loans, lines of credit, minimum card payments, support payments.
Two things follow. First, clearing a single small monthly payment often moves more qualifying room than months of saving — and how much depends on your income. At a $60,000 household income a $500 monthly payment costs roughly $37,000 of purchase price; at $100,000 it costs about $12,000; above roughly $120,000 it can cost nothing at all, because the gross debt service cap binds before the total debt service one. See what your own debt actually costs you → Second, credit unions are provincially regulated and are not bound by the OSFI qualifying rate. In this province that is not a technicality: credit unions are an active part of the market and are the sole delivery channel for the provincial 2%-down first-time buyer program.
The ladder back to prime
The goal is never to stay at an alternative lender. A properly structured difficult file looks like this:
- Now. Place the mortgage where it can actually fund — a credit union, an alternative lender, or if necessary a private lender — on a term of one to three years. How the tiers differ →
- Immediately after funding. Fix the nameable cause. Clear the arrears, file the outstanding returns, open the trade lines, pay down the revolving balances to under 30% of their limits.
- Twelve months in. Review. On many files the return to an A-lender is possible a year earlier than people assume, and nobody tells them because nobody is looking.
- At the term’s end. Move to prime, or renew once more and continue. Every step down the ladder reduces the rate and, on a refinance, releases the equity that the higher-rate period consumed.
What you are entitled to before paying anyone
This is the part of the market where fees appear, and Nova Scotia regulates them. Under the Standards of Conduct for Mortgage Brokerages Regulations, fees must be disclosed to you in writing before services are provided — and Section 22 of the Standards of Conduct for Mortgage Brokerages Regulations: a brokerage must not charge or collect a fee from a borrower until the lender has confirmed funding in writing, the borrower has accepted the commitment in writing, and the borrower has a copy of the signed commitment. On standard A-lender residential mortgages there is no borrower fee at all; the lender pays the brokerage. If you are asked for money up front on the strength of an approval you have not seen in writing, stop. What the disclosure must contain →
When the answer is not a mortgage
Sometimes the arithmetic does not work, and the useful thing is to say so. If the total debt exceeds what 80% of your equity can clear, refinancing spends the equity that would otherwise protect you and delays the problem by a year. In that situation the right referral is a licensed insolvency trustee, or a sale on your own terms rather than someone else’s. You will get that answer here if it is the true one, at no cost and without a pitch attached.
Questions people ask
What credit score do I need for a mortgage in Nova Scotia?
For an insured mortgage, at least one borrower or guarantor needs a minimum credit score of 600. Below that the file moves to an alternative (B) lender or a private lender, where approval is driven by equity and the story behind the credit rather than by the score itself. There is no score at which borrowing becomes impossible — only one at which it becomes more expensive.
Why did the bank decline my mortgage?
Usually one of five things: the credit score or a specific derogatory item, the debt-service ratios failing at the the greater of the contract rate plus 2% and 5.25% qualifying rate, income the lender could not verify in the form it was given, a down payment whose source could not be traced, or the property itself. Each has a different fix, which is why the first useful step is finding out which one it was — banks often do not volunteer it.
Can I get a mortgage after a consumer proposal in Canada?
Yes. The usual requirement is that the proposal is fully discharged, with a certificate of full performance, and that you have re-established credit afterwards — commonly two active trade lines reporting for twelve to twenty-four months with no missed payments. Some alternative lenders will lend before that point at a higher rate. Insolvency trustees, not brokers, currently own the search results for this question, which is why it is answered here.
Can I get a mortgage with CRA tax arrears?
Most A-lenders will not refinance while arrears are outstanding, because the Canada Revenue Agency can register a lien that takes priority. The practical route is usually a refinance or second mortgage that pays the arrears directly from the proceeds at closing, so the lender can see the debt cleared as a condition of funding rather than trusting it will be. It is a solvable problem and a common one.
How long does bad credit stay on my file in Canada?
Most negative information ages off six to seven years from the date of last activity, and a bankruptcy or consumer proposal from the date of discharge. Importantly, lenders weigh recency heavily: a missed payment from four years ago matters far less than one from four months ago, so time genuinely does most of the work.
Is a B-lender mortgage permanent?
It should not be. A well-structured alternative mortgage is written for one to three years with a specific plan to return to an A-lender at the end — credit re-established, arrears cleared, returns filed. If nobody has discussed the exit with you, the plan is missing.
A decline letter is the start of the conversation
Send what happened. You get back which of the five causes it was, what it takes to fix, roughly how long, and whether a different A-lender would simply have said yes.