Roll the dice
Getting Approved Isn’t Luck. It’s a Checklist.
Most people treat commercial mortgage approval like a roll of the dice — you submit your application, hold your breath, and hope for the best. It isn’t luck. Every underwriter who reviews your file is working through the same short list of boxes, in roughly the same order, every single time. Know the checklist, and the outcome stops feeling random.
Here’s exactly what’s being checked — and how to make sure every box comes back green before you submit.
Box 1: Debt Service Coverage Ratio (DSCR)
The underwriter’s first question is simple: does the property’s income actually cover the mortgage payment? Most lenders want to see a DSCR of 1.25 or higher — meaning the property generates 25% more income than what’s needed to service the debt.
Here’s what that looks like in real numbers. Say you’re buying a 4-unit property in Halifax generating $48,000 in annual net operating income. Your proposed mortgage payment is $32,000 a year. That’s a DSCR of 1.50 — comfortably above the 1.25 threshold, and a deal most lenders would be glad to underwrite. Drop the rents to $38,000 against that same $32,000 payment, and your DSCR falls to 1.19 — under the line, and now the deal needs a bigger down payment, a lower purchase price, or it waits.
Before you submit: run your own DSCR calculation using realistic (not optimistic) rent projections. If it’s under 1.25, either the price needs to come down, the down payment needs to go up, or the deal needs to wait.
Box 2: Loan-to-Value (LTV) Ratio
The second box is how much you’re borrowing relative to what the property’s worth. Lenders typically want 75% or lower, though this varies by property type — multi-family with CMHC insurance can go up to 85%, while special-purpose properties may cap out at 50-65%.
Using the same 4-unit example: if the property appraises at $900,000 and you’re requesting a $650,000 loan, that’s a 72% LTV — inside the typical 75% ceiling. Push the loan to $700,000 on that same appraisal and you’re at 78%, which pushes you outside most conventional lenders’ comfort zone and into a smaller pool of options.
Before you submit: know your LTV cold, and know which bucket your property type falls into. Walking in with the wrong expectation here is one of the most common reasons deals stall.
Box 3: Financial Statements
Underwriters want to see the real financial picture — personal and business income statements, balance sheets, and two to three years of tax returns. This isn’t a formality; it’s how they verify everything else in your application actually holds up.
Before you submit: have these organized and current before you apply, not scrambled together after a lender asks. A clean, complete package the first time signals you’re a low-friction borrower.
Box 4: Property Viability
The underwriter isn’t just assessing you — they’re assessing the property. Is it in a location with real demand? Does it meet zoning and regulatory requirements? Would it hold its value if you needed to exit?
Before you submit: have comparable sales, a realistic rent roll, and confirmation the property is zoned for its intended use.
Box 5: Your Experience
If this is your first commercial property, that’s not disqualifying — but it is a checked box either way. Lenders factor in whether you (or a partner) have managed similar properties or businesses before.
Before you submit: if you’re a first-timer, consider bringing in a co-signer or property manager with a track record. It directly offsets this box.
Box 6: Down Payment Strength
Most commercial mortgages require 20-30% down. More than the minimum does real work for you — it lowers your LTV, often improves your rate, and reduces the debt load the lender is underwriting against.
Before you submit: know that every extra percentage point down is negotiating leverage, not just a bigger check.
Box 7: Your Total Portfolio Exposure
This one surprises a lot of first-time commercial buyers. Lenders don’t just look at the single property in front of them — they look at your total exposure across everything you already own. If you’re carrying three other mortgages, even performing ones, that changes how much additional risk a lender is willing to take on with you specifically.
Before you submit: have a clear summary of your existing portfolio ready — every property, every mortgage balance, every income stream tied to them. If you’re actively expanding, this is a box worth discussing with your broker before it becomes a surprise mid-application.
Your LTV and DSCR are two of the seven boxes above — but they’re also the two numbers worth understanding in more depth before you apply anywhere. I’ve broken down how commercial LTV actually works, and built a free Cap Rate & Deal Analyzer that runs your cap rate and DSCR side by side — worth running your numbers through before you submit.
When the Checklist Doesn’t Line Up
If one or two boxes aren’t where they need to be, that doesn’t mean the deal is dead — it means you go to a different door.
Credit unions often have more flexibility than the big banks on income verification and property type, while still operating under regulated, conventional terms.
Monoline lenders — mortgage-only institutions with no branches, working exclusively through brokers — sometimes offer more competitive rates and more flexible underwriting than traditional banks, precisely because mortgages are their entire business.
Private lenders evaluate the same boxes but weigh them differently — a DSCR or LTV that a bank rejects outright might be perfectly financeable through a private bridge loan, at a higher rate, as a short-term solution while you strengthen your position for conventional refinancing later.
This is where working with a broker changes the outcome — not because of luck, but because I know which lender’s checklist your file actually fits.
Frequently Asked Questions
What DSCR do I need for a commercial mortgage in Canada?
Most conventional lenders want a minimum DSCR of 1.25, meaning the property’s income covers the mortgage payment with 25% to spare. Some alternative and private lenders will consider deals closer to 1.0-1.15, typically at a higher rate.
What’s a good LTV for commercial financing?
75% or lower is the general benchmark for conventional lenders, though CMHC-insured multi-family properties can go up to 85%. Special-purpose properties (like self-storage or single-tenant industrial) are typically capped lower, around 50-65%.
Can I get approved for a commercial mortgage with no prior experience?
Yes — lack of experience isn’t disqualifying, but it is a factor lenders weigh. Bringing in an experienced co-signer or a property management partner can offset this and strengthen your application.
Why Work With Me
I don’t submit your file and hope. I go through this exact checklist with you before we ever approach a lender, so we’re not finding out about a weak box after a decline — we’re fixing it in advance, or steering to the lender whose criteria already fits your numbers.
If you’re preparing for a commercial purchase or refinance, let’s run your file against this checklist together before you apply anywhere.
Patrick
p.s- You can click on this link to start the process whenever you are ready. Schedule your meeting with me here.
p.s.s- I should tell you that I am licensed in Nova Scotia Brokerage (2025-3000179) Broker (2025-3000180), Ontario(M18001555).
p.s.s.s You can download my new mortgage app here
