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How do lenders determine your maximum mortgage?

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There are 2 different ratios that lenders use in order to determine your maximum mortgage amount.

(GDS) Gross Debt Serving Ratio: This pertains to the costs associated with owning the home. That includes your mortgage payment, property taxes and heat. Traditionally $100 flat rate has always been used for the heat amount, however since the mortgage changes last year that amount will vary by lender. No more than 35% of your gross income can be used towards the combined total of those expenses. If you have a credit score above 680, that is increased to 39%
 
(TDS) Total Debt Servicing Ratio: That includes all of the expenses listed for the GDS as well as any other monthly obligations. That could be credit cards payments, loans, child support ext. Keep in mind that for most revolving credit (credit cards, lines of credit ext.), they will use at least 3% of the balance as your monthly payment. No more than 42% of your gross income can be used towards all of your debts combined. If your score is over 680, you can increase that maximum to 44%.
Some lenders have set their own maximum GDS and TDS however these are the numbers that are used by the insurers (CMHC, GE & CG) and we have access to many lenders who will also go this high.

Fore more information on debt ratios or for any mortgage related questions at all - please feel free to contact me today.

http://www.christinebuemann.com
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Location: 1596 3rd Avenue, Prince George, BC V2L 3G4, Canada

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