1. Income & Employment Stability
- Gross Monthly Income: The higher your income, the more you can afford to borrow.
- Job Stability: Lenders prefer borrowers with a steady income and at least 2 years of stable employment.
- Additional Income Sources: Rental income, bonuses, or investments can increase affordability.
2. Credit Score
- A higher credit score (680+) qualifies you for lower interest rates, reducing mortgage costs.
- A low credit score may lead to higher rates or loan denial.
- Consumer proposal & Bankruptcy on credit file could lead to mortgage denial from A & B lenders
3. Down Payment
- A larger down payment (e.g., 20% or more) reduces your mortgage amount and removes mortgage insurance costs (CMHC in Canada).
- A small down payment means higher monthly payments and additional insurance costs.
4. Total Debt Service (TDS)
- This ratio compares your total monthly debt payments (including loans, credit cards, and car payments) to your income.
- Lower TDS (below 40-44%) improves mortgage affordability.
5. Interest Rates
- Higher interest rates increase monthly payments, reducing affordability.
- Lower rates make mortgages more affordable, allowing you to qualify for a larger loan.
- Fixed vs. Variable Rates: Fixed-rate mortgages provide stability, while variable rates can fluctuate
6. Amortization Period
- Longer Terms (25-30 years) lower monthly payments but increase total interest paid.
- Shorter Terms (15-20 years) have higher monthly payments but save on interest.
7. Property Taxes & Insurance
- Property taxes vary by location and impact overall affordability.
- Homeowners insurance is required and adds to costs.