Qualifying for a Mortgage

Buyers' Guide

Gross Debt

Usually a lender will not allow your monthly housing expenses (mortgage payment and taxes), plus condominium maintenance fee, if applicable, to exceed 30% of your monthly gross family income. (Gross Debt Service Ratio -GDS) Some lenders will allow up to 35% GDS, depending upon other variables.

Total Debt

Lenders also review Total Debt Service Ratio (TDS). When using this calculation, a maximum of 40% of your gross family income may be used to determine the amount you can afford to pay for mortgage payments, taxes and other fixed monthly expenses. Other fixed costs are auto loans, personal loans, revolving charge accounts and department store accounts. Note: This calculation may vary depending on the lender and other variables.

A real estate professional can help you estimate the taxes for the home you are purchasing. Deduct the monthly tax and you will be able to determine how much you can afford to spend for housing costs each month.

Frequently Asked Questions

Q. Should I Review My Credit Report Before Looking For A Home? 
A. Yes, review your credit report and ensure that the information recorded is accurate. 

Q. What Should I Do If There Is An Error On My Credit Report? 
A. The credit reporting agency provides specific details to help you resolve any issues. 

Q. What If I Have A Lot Of Credit Card Debt? 
A. The amount of outstanding long-term debt you owe will influence the loan amount. 

Q. What If I Have Late Payments? 
A. It is possible to explain the cause of late payments. 

Q. Is There Such A Thing As Having Too Much Credit? 
A. Yes, a large number of unused lines of credit cards can harm your rating. 

Q. Should I Be Concerned About Applying For Credit Too Often? 
A. Yes. Lenders keep track not only of how much credit you have, but how often you apply. 

Q. What If My Loan Application Is Rejected? 
A. Your mortgage broker and your real estate professional can assist with this issue.