You had a pre-authorization. You signed a purchase offer. A week later, the lender comes back: denied. The panic is legitimate — but this is not the end of the file in Quebec. Here are the 6 actions to take within 48 hours to save the purchase.
Understanding why a denial happens at this stage
A denial after pre-authorization almost always comes from a gap between the initial file and the final file. The most common causes:
- New debt that appeared between the pre-authorization and the offer (car loan, line of credit, reactivated student loan)
- Job change or probationary period that was not disclosed
- Credit score that dropped (late payment, high credit card utilization)
- Lender appraisal lower than the purchase price (the gap breaks the LTV ratio)
- Documents missing or incomplete at final verification
- GDS/TDS ratios recalculated with the exact property taxes, now exceeding the thresholds
Good news: except for a collapsed credit score, all these cases have a solution within 24 to 72 hours.
Action 1 (immediate): check the financing condition in your offer
Open your purchase offer. Look for the section labelled "conditions" or "conditional obligations".
- If you have a financing condition ("the buyer must obtain mortgage financing within X days"): you are protected. Notify the seller's real estate broker in writing before the condition deadline. The contract becomes null and the deposit is refunded. You lose nothing.
- If you have no financing condition (a "firm" offer that beat a competing offer): the denial puts you in default. You risk losing the deposit (typically $2,000 to $15,000) and the seller can claim damages. Move immediately to actions 2 through 6.
Action 2 (24h): call a mortgage broker in the Courteo network
An AMF-licensed mortgage broker has access to 20 to 30 lenders. Your bank is only one of them. The broker can:
- Understand in 30 minutes why the lender denied the file (technical reason vs profile reason)
- Submit the file to 3 to 5 alternative lenders the same day
- Negotiate a 5 to 10 day extension with the seller if necessary
No time to go through the Courteo platform? A direct broker works. But Courteo automatically routes to an available broker who specializes in atypical files, which compresses the intake step.
Action 3 (24-48h): assess alternative lenders
Monoline lenders (MCAP, First National, RFA) and B lenders (Equitable Bank, Home Trust, Manulife B) accept profiles that A banks decline:
- Self-employed borrowers with 1 year of financial statements
- GDS ratios up to 44% (vs 39% at an A bank)
- Newcomers without a full Canadian credit history
- Credit scores of 600 to 680 (vs 680+ at an A bank)
Trade-off: rates typically 25 to 75 basis points higher (roughly 0.5% to 1% above). On a $400,000 mortgage over 5 years, that represents an estimated $3,000 to $6,000 in additional interest. Often less costly than a lost deposit of $10,000.
Action 4 (24h): negotiate with the seller
If the offer is firm without a financing condition, but the seller has not yet found a replacement buyer, they may be more interested in granting an extension than restarting a negotiation. Your real estate broker can negotiate an "amendment to the offer" that adds:
- A retroactive financing condition of 5 to 10 business days
- Or a price adjustment that brings the property back within a financeable budget
Sellers often accept because putting the property back on the market takes 30 to 60 days and other buyers are not guaranteed.
Action 5 (24h): document the correctable issues
If the denial comes from a specific correctable point:
- New debt: pay it off (line of credit, credit card). Consider a co-signer (parent, spouse) to improve the ratios.
- Recent credit score drop: pay card balances below 30% of the limit before the next Equifax update reaches the lender (7 to 30 days).
- Low appraisal: request a counter-appraisal (paid, $300 to $500) from an AACI-designated appraiser. If the gap is real, renegotiate the price.
- Probationary employment: an employer letter confirming upcoming tenure plus bank statements proving 24 months of stability.
Action 6 (48h): consider a larger down payment
If the LTV gap is the issue (low appraisal) and you have liquidity available:
- Increasing the down payment by 5 to 10% often moves the file from denied to conditional approval
- Accepted sources: RRSP HBP (up to $60,000 per person in Quebec since 2024), a documented family gift (gift letter plus bank statement), TFSA
Watch out: a "personal loan" from family is refused (the lender wants a definitive gift, not a hidden loan).
What Courteo does in a denial scenario
The Courteo platform routes urgent files to an available broker within 2 business hours. The AMF-licensed broker reviews the file, contacts 3 to 5 alternative lenders the same day, and coordinates negotiation with the seller if needed. No fees on the buyer side — the broker is compensated by the selected lender.
FAQ
How long do I have after a denial to find another lender? It depends on two deadlines: (a) the financing condition if one exists (typically 5 to 10 business days from acceptance), and (b) the notarial signing date. An AMF-licensed mortgage broker can submit the file to a B lender the same day and obtain a conditional response within 24 to 72 hours.
Does a denial from the bank mean a denial from every lender? No — roughly 90% of A-bank denials are acceptable at a monoline or B lender with a rate 25 to 75 basis points higher. Each lender uses its own risk grid. A broker knows each lender''s tolerances and presents the file to the right one.
Can I recover the deposit if the offer was firm without a financing condition? It is difficult. The deposit is typically kept by the seller as liquidated damages. Unless you can prove seller fault (an undisclosed latent defect, refusal to cooperate with the inspection). A real estate lawyer decides in the event of a dispute.
How much does a B-lender loan cost compared to an A bank? Typically 0.5% to 1% higher in rate. On a $400,000 mortgage over 5 years, that represents an estimated $3,000 to $6,000 in additional interest. Clearly less costly than a lost deposit of $10,000 to $15,000. After 12 to 24 months of impeccable payments, a refinance at an A bank becomes possible again.
Can I use a private lender as a last resort? Yes, but it is rarely recommended for a first residential purchase. Private lenders charge 7% to 12% plus file fees (2% to 4% of the principal). Only justified for very specific situations: bridging 3 to 6 months before an A-bank refinance, or an atypical file (major renovation, non-conforming property).