Do you find yourself looking at realtor.ca dreaming about home ownership one day? Do you play with the mortgage calculator to try and figure out what can afford? Please allow me to walk you through the banks qualifying process.
Let’s assume you have good credit, are gainfully employed and filed your taxes for the past two years. Generally speaking, lenders will look at your tax returns, look at how much debt you owe, what the property taxes are going to be on your perspective home, heating costs and if you’re looking for a condo – 50% of condo fee’s into are thrown into the equation. What do they do with all this information? When it comes to qualifying for a mortgage your gross debt service ratio or GDS can’t exceed 39% (Mortgage, heat, tax payments) and your total debt service ratio or TDS can’t exceed 44% (All monthly debt + housing expenses). To make things even more confusing there was a new rule put into place called a stress test. In a nutshell, the government wants to make sure people can pay their mortgage if the interests rates climb, so instead of qualifying people on what they are actually going to be paying, you are going to be qualified the government benchmark which is currently at a 4.64% interest rate. (If this is lower than what you are paying currently, call me immediately) I know this is all pretty darn confusing. Let me show you an example.
Betsy has a $60,000 income with $8000 credit card debt, $20,000 down payment. Ideally, she would like to have something that’s $300,000. Assuming she’s buying a house where heating costs are $100 per month and property taxes of $2500 per year. Under our current rules, she would qualify!
This is how it’s broken down:
GDS – 38.73%
TDS – 43.530%
Now if you have any questions on what you can qualify for please don’t hesitate to give me a ring, text or an email, we can go over scenario’s and put your mind at ease.
Your Mortgage Professional,
Dominion Lending – GoToBrokers