Getting declined for a mortgage is gut-wrenching. You have found the home, made the offer, maybe even started imagining life there — and then the lender says no. But here is what most people do not realize: a decline from one lender does not mean you cannot get a mortgage. It means that specific lender, with their specific criteria, said no to your specific application.
In Alberta, there are dozens of alternative pathways to approval. The key is understanding why you were declined, and then matching your situation to the right lending solution.
Why Mortgages Get Declined
Before exploring solutions, it is important to understand the most common reasons for declines. Each reason has a different fix.
Credit Issues
This is the most common decline reason. It includes:
- Low credit score — below 600 for most lenders, below 680 for prime lenders
- Recent late payments — especially on existing mortgages or credit cards
- Collections or judgments — even small amounts in collections can trigger a decline
- Consumer proposal or bankruptcy — recent or undischarged
- Too much credit utilization — using more than 75% of available credit
Income Issues
- Insufficient provable Income — especially common for self-employed borrowers
- Income not meeting stress test requirements — you earn enough for the actual payment but not the stress-tested payment
- Probationary employment — new job with a probation period
- Non-permanent income sources — contract work, seasonal employment, tips, or commissions
Property Issues
- Appraisal came in low — the lender's appraisal values the property below the purchase price
- Property condition concerns — structural issues, environmental problems, zoning violations
- Non-standard property type — tiny homes, mixed-use buildings, properties on leased land
Debt Issues
- GDS/TDS ratios exceeded — your debt load is too high relative to income
- High consumer debt — credit cards, lines of credit, car loans pushing ratios over limits
The Lending Spectrum: A to Private
Canadian mortgage lending exists on a spectrum. Understanding where you fit determines your options.
A-Lenders (Prime)
These are the major banks and monoline lenders. They offer the best rates but have the strictest qualification criteria. Credit scores of 680+, fully verified income, clean payment history, and standard properties. If you have been declined by an A-lender, the next step is to look at other options on the spectrum.
B-Lenders (Alternative)
B-lenders are the most underutilized option in Canadian mortgages. These are regulated, institutional lenders who specialize in borrowers who fall slightly outside prime guidelines.
B-lenders typically accept:
- Credit scores of 550 to 679
- Self-employed borrowers with non-traditional income documentation
- Higher debt service ratios (up to 50% TDS in some cases)
- Properties that prime lenders have concerns about
- Borrowers with a previous consumer proposal (discharged 1+ years)
B-lender rates are typically 0.5% to 2.0% higher than prime rates. On a $400,000 mortgage, this translates to roughly $100 to $400 more per month compared to the best available rate. For many borrowers, this is a small price to pay for homeownership.
B-lender fees usually include a 1% lender fee that is added to the mortgage balance. On a $400,000 mortgage, that is $4,000.
Private Lenders
Private mortgages are the last resort, but they are a legitimate and sometimes necessary option. Private lenders are individuals or private companies who lend their own capital, secured by real estate.
Private mortgage characteristics:
- Interest rates of 7% to 12% (significantly higher than prime)
- Lender fees of 1% to 3% of the mortgage amount
- Terms are typically 1 to 2 years (not 5-year terms like traditional mortgages)
- Qualification is primarily based on property equity, not income or credit
- Require at least 15% to 25% equity in the property
When private lending makes sense:
- You need to close quickly and cannot qualify with a traditional lender in time
- You have a consumer proposal or recent bankruptcy but have equity
- The property itself does not qualify with institutional lenders
- You need bridge financing between properties
- Your income is sufficient but cannot be documented in a way traditional lenders accept
The Critical Rule for Private Mortgages
A private mortgage should always have an exit strategy. You should enter a private mortgage with a clear plan to refinance into a B-lender or A-lender within 12 to 24 months. This might involve:
- Improving your credit score to qualify with a traditional lender
- Waiting for a consumer proposal discharge period to pass
- Stabilizing your income documentation
- Building equity through payments and property appreciation
Going into a private mortgage without an exit strategy is risky and expensive. The high rates and fees are sustainable for a short period as a bridge to better financing — they are not sustainable long term.
Deal Rescue: When Time Is Not on Your Side
Sometimes a mortgage gets declined after you have already made an offer, removed conditions, or committed to a purchase. In these situations, timing is critical. You need a lender who can close quickly, and you need a broker who has relationships with lenders who can move fast.
The Deal Rescue Process
- Immediate assessment — Why were you declined? What needs to change?
- Lender matching — Which alternative lender can approve this deal within the remaining timeline?
- Documentation sprint — Gathering whatever additional documentation the new lender requires
- Application and approval — Submitting to the matched lender and getting a commitment
- Legal and closing — Coordinating with your lawyer to ensure the deal closes on time
I have rescued deals that were declined with as little as 72 hours before closing. It is stressful, but it is possible when you have the right lender relationships and the experience to know exactly which lender will say yes to your specific situation.
Consumer Proposals and Bankruptcy: Not the End of the Road
A consumer proposal or bankruptcy on your credit file does not permanently disqualify you from homeownership. The timelines and options are as follows:
After a Consumer Proposal
- During the proposal — Private lenders may finance you with 20% to 25% equity
- Discharged less than 1 year — Some B-lenders will consider your application
- Discharged 1 to 2 years — More B-lender options become available
- Discharged 2+ years with re-established credit — A-lender qualification becomes possible
After a Bankruptcy
- Undischarged — Only private lenders, with significant equity required
- Discharged less than 2 years — B-lender options, typically requiring 20% down
- Discharged 2+ years with re-established credit — A-lender options open up
- Discharged 4+ years with strong re-established credit — Full access to prime lending
Re-Establishing Credit
The fastest way to rebuild credit after a proposal or bankruptcy:
- Get a secured credit card ($500 to $1,000 limit) immediately after discharge
- Use it for small, regular purchases (gas, groceries)
- Pay the full balance every month — never carry a balance
- After 6 months, apply for a second credit product (a small personal loan or second credit card)
- Maintain perfect payment history for 12 to 24 months
Two active credit accounts with 12+ months of perfect payment history is the minimum most B-lenders want to see.
When to Walk Away
Not every deal can be rescued. There are situations where the best advice is to step back, address the underlying issues, and come back stronger in 6 to 12 months.
Consider stepping back if:
- The only available option is a private mortgage at 12%+ with no clear exit strategy
- Your debt levels are unsustainable even with a mortgage approval
- The property has serious condition issues the lender has flagged
- You are being pressured to proceed without understanding the full costs and risks
A good mortgage broker will tell you when to proceed and when to wait. The goal is not just to get you approved — it is to get you into a mortgage that sets you up for long-term financial success.
Your Next Steps
If you have been declined for a mortgage, do not assume the answer is permanently no. Start with these steps:
- Get your decline letter — ask the lender for a specific reason
- Pull your credit report — check for errors, collections, or issues you may not be aware of
- Contact a mortgage broker — specifically one with experience in alternative and private lending
- Be transparent — share your full financial picture. The more your broker knows, the better they can help
In Alberta, with no land transfer tax and a range of lending options from prime to private, there are more pathways to homeownership than most people realize. The right strategy, matched to your specific situation, can turn a decline into an approval.
