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lowside67 · 10-19-2015, 05:36 AM

There is quite a bit of misinformation on this page about how banks qualify people for mortgages. The two ratios that are measured are GDS ("gross debt service") and TDS ("total debt service")

GDS = housing costs only, specifically: mortgage, utilities, property taxes, and 50% of strata fees if applicable.

TDS = GDS + any other payments such as car, student loans, etc.

If you are going to require CHMC insurance...(<25% down payment or poor credit rating)
1) Maximum purchase price of property is $1-million
2) Maximum amortization is 25 years
3) GDS = maximum 32% of gross income
4) TDS = maximum 40% of gross income
Based on these numbers, a couple earning $150k/year could qualify for monthly housing costs of $4,000. An $800,000 mortgage = $3,391 per month at 2.0% / 25 years. Even assuming no strata fees, it's unlikely that they could qualify for much more when you add in property taxes and utilities.

If you are do not require CHMC insurance...
The rules for CHMC above are rigid and cannot be changed. If you are not requiring insurance, the banks have some flexibility but will typically start with GDS in the 32% range and TDS in the 40% range. For some high value clients or those with strong credit scores without other liabilities, they may bump GDS to 40% so if you have no other debt, you can use the full 40% to qualify.

Based on getting the full 40%, a couple earning $150k/year could qualify for monthly housing costs of $5,000. A $1,100,000 mortgage = $4,066 per month at 2.0% / 30 years. This should easily be doable for a well qualified buyer, especially if the down payment is a bit higher than 25%.

Mark (BMO Employee)

10-19-2015, 05:36 AM	#4088
lowside67 Old School RS Join Date: May 2004 Location: Port Moody Posts: 4,641 Thanked 4,157 Times in 1,262 Posts Failed 130 Times in 80 Posts	There is quite a bit of misinformation on this page about how banks qualify people for mortgages. The two ratios that are measured are GDS ("gross debt service") and TDS ("total debt service") GDS = housing costs only, specifically: mortgage, utilities, property taxes, and 50% of strata fees if applicable. TDS = GDS + any other payments such as car, student loans, etc. If you are going to require CHMC insurance...(<25% down payment or poor credit rating) 1) Maximum purchase price of property is $1-million 2) Maximum amortization is 25 years 3) GDS = maximum 32% of gross income 4) TDS = maximum 40% of gross income Based on these numbers, a couple earning $150k/year could qualify for monthly housing costs of $4,000. An $800,000 mortgage = $3,391 per month at 2.0% / 25 years. Even assuming no strata fees, it's unlikely that they could qualify for much more when you add in property taxes and utilities. If you are do not require CHMC insurance... The rules for CHMC above are rigid and cannot be changed. If you are not requiring insurance, the banks have some flexibility but will typically start with GDS in the 32% range and TDS in the 40% range. For some high value clients or those with strong credit scores without other liabilities, they may bump GDS to 40% so if you have no other debt, you can use the full 40% to qualify. Based on getting the full 40%, a couple earning $150k/year could qualify for monthly housing costs of $5,000. A $1,100,000 mortgage = $4,066 per month at 2.0% / 30 years. This should easily be doable for a well qualified buyer, especially if the down payment is a bit higher than 25%. Mark (BMO Employee) __________________ I'm old now - boring street cars and sweet race cars.