How will lenders evaluate my debt service ratios, and what key factors are considered?
Lenders assess your ability to repay the mortgage by calculating your Gross Debt Service (GDS) and Total Debt Service (TDS) ratios.
Key Points
Your debt payments can't be more than 39% of your gross income for housing costs, and 44% for total debt.
When lenders check if you can afford your mortgage, they'll use either your mortgage interest rate plus 2%, or 5.25%, whichever is higher.
If you're self-employed, you can still get mortgage insurance if you can prove your income with proper documentation.
You'll generally need a credit score of at least 600 to qualify, but there are other ways to prove you can handle a mortgage if you don't have a credit history.
Lenders must follow careful lending practices to ensure they are managing risk responsibly when approving your mortgage.
Primary sources
Primary sources cited by the Ratellow Research Team. Editorial standards · Correction policy
Related Questions
How does mortgage insurance enable lower down payments?
Mortgage insurance lowers the risk for lenders, allowing them to offer mortgages to borrowers with down payments between 5% and 20%.
What property considerations impact my mortgage application?
Lenders carefully assess the property's value and characteristics, directly influencing the loan amount you can secure.
How does the 'straight switch' exemption benefit you at renewal?
The 'straight switch' exemption lets uninsured mortgage borrowers move their mortgage to a new federally regulated lender (FRFI) at renewal without needing to pass the Minimum Qualifying Rate (MQR) .
What are Loan-to-Income (LTI) limits and how will they affect institutional mortgage portfolios?
OSFI is introducing Loan-to-Income (LTI) limits to reduce risks from high household debt in institutional mortgage portfolios .