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Qualifying for a Mortgage

What you need to know when qualifying for a mortgage.

Mortgage brokers will look at your income, your credit history and the amount you can put towards a down payment. They will also look at your current assets and level of debt.

A mortgage broker will use a financial formula to determine how much you can borrow, based on your income and current debts.

Two financial formulas help to determine this:

  • The gross debt service (GDS) ratio.
  • The total debt service (TDS) ratio.

The Canada Mortgage and Housing Corporation (CMHC) has guidelines of 32% of your gross income for the GDS ratio and 40% for the TDS ratio.

What is the GDS?

The percentage of your gross income before deductions such as income tax) required to cover the costs associated with your home, such as mortgage payments, property taxes and heating.

What is the TDS?

The percentage of gross income (before deductions such as income tax) required to cover the costs associated with your home, such as mortgage payments, property taxes and heating, plus other debts, such as credit card payments, car payments or lines of credit.