It is to your advantage to be pre-qualified for your mortgage.  Pre-qualified means that based on your criteria, the financial institution is committing to you an exact limit in dollar terms...so you will know exactly how much house you can buy...whether that home is detached, a semi, a townhome, freehold or a condominium. 

The financial institution will qualify you based on 2 key factors.  Your GDS and / or your TDS.

The GDS is Gross Debt Service Ratio

• It is the ratio based on income in relation to mortgage payments
• GDS = (Principal+Interest+Taxes) / Gross Income
• The ratio should be between 27% and 30 %. 
• Note...some financial institution include heating costs and use a ratio of 32%
• Note...If it's a condominium 1/2 the maintenance is also added in and the GDS must still be in the same ratios

The TDS is Total Debt Service Ratio

• It is the ratio based on income and all debt in relation to mortgage payments
• TDS = (Principal+Interest+Taxes+Debt) / Gross Income
• The ratio should be under 40%

It is important to understand what you can afford to pay for a home depends on other factors besides income.  The money you have on hand for the down payment is also a consideration.  Your Credit Rating or Beacon Score is also a factor.

Consulting your Mortgage Agent or Broker or your Financial Institution will make this all very easy to understand.

The Mortgage Industry parameters for qualification changed in April 2010.  When qualifying a candidate for a mortgage the 5 year posted rate is the standard benchmark being used.  This can vary depending on the mortgage sought and the Lending Institution involved...but this is the standard benchmark now.

Should you have any questions or would like further information please Click Here to contact me by e-mail or phone me at 1-888-877-5165 at your convenience.

    Deborah Gilmore...Your Trusted Source For Anything Real Estate!