The mortgage application process can be intimidating. Just remember that the lenders WANT to lend you money. If they don’t make loans, they don’t make money.
During the mortgage application process, your broker will first determine how much mortgage you can afford using two lending principals:
- Gross Debt Service Ratio (GDSR) calculation: This lending principle simply states that your monthly housing cost should not exceed 32% of your gross monthly family income.
- Total Debt Service Ratio (TDSR) calculation: This lending principle says that your monthly housing cost plus all your debt payments (i.e.: loans, credit cards, leases…etc) should not exceed 40-42% of your gross monthly family income.
The mortgage application process will be an education in terms, its intricate details, and how to fit a square peg into a round hole…like determining the source of your down payment, if you qualify for first-time homebuyer credits, if you have access to your RRSP through the Home Buyer’s Plan, and establishing favourable mortgage terms while getting the lowest interest rate possible.
WHAT the bank needs from you:
- Confirmation of employment income, tax returns, details of your salary and length of employment.
- A list of all your assets and liabilities.
- Information about the house you want to purchase, address, property taxes, inspection report, comparables, and your lawyer’s contact information.
- Proof of home insurance (upon closing), and
- Credit check
If you need a great mortgage affordability calculator I have one on my Buyers page here.
Home buying can be a daunting and complex process, if you have any questions don’t hesitate to contact me here and I’ll walk you through it.