Buyers often calculate a monthly payment they can afford, back into a price, and then feel confused when the lender approves less. The reason is the mortgage stress test.

What the rule says

You have to qualify at the higher of your contract rate + 2%, or a 5.25% floor — not the actual rate you'll pay. So if your rate is 4.19%, you're often qualified as though it were 6.19%. That deliberately lowers the amount a lender will approve, to make sure you can handle higher rates later.

Why it exists

It's a buffer. Rates change at renewal, and the test ensures a rate increase won't push you off a cliff. Knowing it exists is itself a sign you're getting mortgage-ready.

What it means for you

  • Your approved amount will be lower than raw payment math suggests — plan around the approval, not the payment.
  • Reducing other debts and boosting your down payment both help the number the test produces.

Your move

Ask a broker to run your numbers through the stress test early, so your target price is realistic from day one.