Mortgage Qualification & Affordability

Lenders review your verified income, housing costs, other debts, credit history, down payment, property taxes, heating costs and, where applicable, condo fees. They also apply debt-service and qualifying-rate requirements based on the mortgage type and lender policy.

The stress test checks whether a borrower can carry payments at a higher qualifying rate. For most new uninsured mortgages at federally regulated lenders, the prescribed minimum is the higher of 5.25% or the contract rate plus 2 percentage points. Insured mortgages also have qualifying-rate requirements. Certain straight switches can be treated differently; lender underwriting still applies.

Gross Debt Service generally measures housing costs against gross income. Total Debt Service adds other required debt payments. Lenders use these ratios as part of qualification, but acceptable limits can vary by lender, credit profile and mortgage program.

It can. Required monthly payments on car loans, lines of credit, credit cards, student loans and other obligations are normally included in debt-service calculations.

Credit is one part of the decision. A stronger credit profile may open access to more lender options, while missed payments, high balances or recent credit problems can reduce options or change down-payment and pricing requirements.

Not automatically. Your lender's maximum approval is different from your personal comfort level. I encourage clients to consider lifestyle expenses, savings goals, future family plans and emergency reserves before choosing a purchase price.