Qualifying for Home Financing
In Canada there are many variables that all factor into qualifying for home financing here are a few;
- Employment
- Income
- Canadian Residency
- Debt load
- Credit rating
- Down Payment
- Reason for buying real estate (i.e. Primary residence vs. investment property)
Depending on combinations of these variables different mortgage products are available and in some cases no financing is available.
It is important to speak with a mortgage professional early in the process to determine what mortgages are available to you. A mortgage professional can assist you in coming up with a 'game plan' so that even if you can't buy now you will be able to buy down the road.
Let's talk about Debt-Service Ratios, what are they? How will they impact your home financing application?
There are 2 Debt-Service Ratios;
Gross Debt Service Ratio
{[Monthly Mortgage payments (Principal+interest)+monthly heating costs+monthly property taxes+condo fees] ÷ Monthly Gross Income} x 100
The Gross Debt Service ratio cannot exceed 32% of your gross monthly income
Total Debt Service Ratio
{[Monthly Mortgage Payments+heating costs+property taxes+total monthly debts] ÷ Monthly Gross Income} x 100
The Total Debt Service Ratio cannot exceed 40% of your gross monthly income
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