Buying Tips & Process

For lending institutions and mortgage insurers, affordability can be summed up by the debt service ratios, as indicated by your gross debt service ratio and total debt service ratio. Although debt service ratios are an indicator of bottom-line affordability, other real-world factors (ex. groceries, child care, and transportation) should be considered up front by potential homeowners.

To find out how much you can afford, try using the Mortgage Affordability Calculator.

Your credit score is determined by these factors*:

• Your payment history (do you pay your credit cards on time? Do you miss your debt payments?)
• Bankruptcy (have you declared bankruptcy in the last 7 years? Has a collection agency had to collect unpaid bills from you?)
• Account history (how long have you had credit?)
• Inquiries made about your credit report (how often do people ask about your credit report?)
• Type of credit you are using (do you carry high balance on your credit cards and/or lines of credits)

Each factor is weighted differently. The most important factors are your payment history, bankruptcy and the amount of your outstanding credit balances.

You can check your credit score for free at Credit Karma.

*information from the Financial Consumer Agency of Canada

Two qualification factors for a mortgage are your gross debt service ratio (GDS) and total debt service ratio (TDS).

GDS refers to the percentage of your household’s gross monthly income that goes toward your housing payments – mortgage (principal + interest), property taxes, heating and, if applicable, 50% of condo fees. Lenders use your GDS and TDS (total debt service) ratios to assess your mortgage application and to determine how much to loan you and what interest rate to apply.

TDS refers to the percentage of your household’s gross monthly income that goes toward housing costs (i.e., mortgage, property taxes, heating, etc.) plus your other debts and financing (i.e., car loans, credit cards, etc.). Banks use this calculation, along with your gross debt service ratio, when assessing your mortgage application.

Other qualification factors are your down payment, cash for closing costs, credit history, and income.