If you’ve ever applied for a mortgage in Canada, you’ve probably heard the word underwriting tossed around. It’s the behind-the-scenes process that determines whether your deal gets funded or declined
But what exactly is underwriting and what actually happens between submitting your mortgage application and receiving the funds?
In this article, I’ll break down every stage of the Canadian mortgage underwriting process in plain language so you can understand what’s happening, why it matters, and how to make it go smoothly.
Why Understanding the Underwriting Process Matters
Underwriting is a lender’s way of asking one big question:
Can this borrower be trusted to repay the loan?
It’s about risk management.
The underwriter’s job is to verify that the information provided is accurate and that the loan makes sense based on their income, assets, and property value compared to the risk tolerance of the lender’s investors.
Understanding the process helps you:
- Avoid delays and missing documents
- Communicate more effectively with your broker or lender
- Set realistic expectations for timelines
- Strengthen your overall approval odds
In short: knowledge creates speed and confidence.
Step 1: The Mortgage Application
Everything starts with a detailed application.
Borrowers must provide personal, financial, and employment information which helps lenders paint a full picture of their situation.
Don’t be lazy.
Provide all of the details, including assets and liabilities, to the best of your recollection. Skipping over one section might save you a seconds of minutes of applying, but it may cause days of delay.
Remember: You are asking for someone to give you hundreds of thousands of dollars, so please take the process seriously. I have seen countless applications with incomplete sections.
The only thing this will do for you is cause a delay.
You’ll typically need:
- Proof of income-
- Employee
- Last 2 T4s
- Last 2 NOAs
- Job letter
- Last 2 pay stubs
- Self-employed
- Last 2 years NOA
- Income Tax Returns for the last 2 years
- Audited Financial Statements for the last 2 years
- 12 Months of Business Bank statements showing income
- Employee
- 12 Months of Bank statements showing assets and down payment accumulation
- 2 pieces of Government-issued ID
- Details about the property
- The purchase agreement, if applicable
If you own any properties then you must provide all of the details including mortgage statements and property tax statements.
Small mistakes like missing pay stubs or inconsistent job titles can cause delays so make sure to note any descrepencies so the broker/agent can explain this to the lender.
Submitting a complete, accurate application, with legible documents in the right format, saves everyone time.
Documents:
Bank statements- should contain your name, your account number, and be in PDF format. If you want to delay the process, then send a screenshot.
2 pieces of ID- One ID must be a photo ID and they cannot be expired.
Paystubs- It should show your full wage, if your most current paystub is below your typical wage then you must provide an explanation for this and a paystub which shows your typical pay.
Letter of Employment- It must include: start date, position, salary/hourly income.
Step 2: The Pre-Screen and Initial Review
Before a full underwrite, most brokers or lenders do a quick “pre-screen.” This is a simple check to ensure the file meets basic criteria.
During this stage, they will:
- Run a credit check
- Calculate your debt ratios (GDS and TDS)
- Verify that your income level fits the desired loan amount
- Identify and explain any early red flags (e.g., recent job changes, high debts)
- Match you to the right lender and mortgage product
This step helps avoid wasted time submitting to a lender that won’t approve your file.
Step 3: Documentation and Verification
Now the serious work begins. The underwriter or broker verifies every piece of documentation to confirm accuracy and consistency.
This includes:
- Checking employment income through NOAs and pay stubs
- Ordering an appraisal to verify property value
- Verifying the source of the down payment (no unexplained large deposits)
- Confirming ID and signatures
- Looking for signs of misrepresentation or missing info
📁 Pro tip: Respond quickly to document requests. Every day you delay can push your closing date back.
Step 4: The Lender’s Underwriting Analysis
This is the heart of the process — where the underwriter decides whether your mortgage fits within their risk tolerance.
They assess the 5 Cs of Credit:
Character — your credit history and reliability
Capacity — your income and ability to repay
Capital — your savings and net worth
Collateral — the property’s value and condition
Conditions — broader economic or lending factors
They’ll also test your affordability using the mortgage stress test, review the appraisal, and ensure the loan-to-value (LTV) is acceptable.
Outcome? Approval, conditional approval, or decline.
Step 5: Conditional Approval and Commitment Letter
If your application passes underwriting, you’ll receive a conditional approval — also known as a commitment letter.
This document outlines:
- Your approved mortgage amount
- Interest rate and term
- Any conditions that must be met before funding
Common conditions include updated pay stubs, appraisal confirmation, or legal documents.
Sign the commitment letter only after reviewing it carefully — and ensure your broker helps you satisfy every listed condition.
Step 6: Final Underwriting and Compliance Checks
Once conditions are met, the lender performs a final verification. This ensures nothing has changed since the initial approval.
Expect:
- A review of all signed documents
- Compliance checks (anti-money laundering, ID verification)
- Reconfirmation of insurance (CMHC, Sagen, or Canada Guaranty for insured deals)
- Title search results from your lawyer
This step is often where delays happen if documentation isn’t consistent. Stay proactive and communicative.
Step 7: Legal Work and Closing Preparation
With underwriting complete, your file moves to the legal stage. The lender sends mortgage instructions to your lawyer or notary.
Your lawyer will:
- Prepare the mortgage documents for signing
- Review the title and property insurance
- Handle disbursements (to the seller, realtor, or other parties)
- Provide a detailed closing statement showing all costs
⚖️ Make sure to review every line of your closing package before signing — this is your final chance to catch errors.
Step 8: Funding and Post-Closing
Finally — funding day.
Once all parties confirm the documents and the lender releases the funds, your lawyer completes the transaction. The mortgage is now officially registered against the property.
After funding:
- Set up your payment schedule with the lender
- Keep records of your legal documents and closing statement
- Maintain insurance and property tax payments on time
- Expect a brief post-funding review from the lender for compliance
Congratulations — your mortgage journey is complete. 🎉
How to Make the Process Smoother
A smooth underwriting experience comes down to preparation, communication, and transparency.
Here’s what helps most:
- Submit a full and accurate application the first time
- Put all of your documents together BEFORE you apply
- Respond quickly to your broker or lender’s requests
- Avoid making major financial changes mid-process (No major purchases or job changes during this process. Most lenders want to know if you have changed jobs during your term.)
- Stay in touch with your lawyer before closing day
- Keep your documents organized and easy to access
The underwriting process might seem intimidating, but remember — it’s designed to protect both you and the lender. The better your file, the faster you’ll reach the finish line.
Leon Johnson is a Canadian Mortgage Underwriter who helps brokers and borrowers structure strong, compliant, and fundable mortgage applications.
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