Qualifying versus Affording a Home Purchase

When looking at purchasing a new home many buyers do not consider the difference between qualifying for and affording a new home.

As a mortgage agent in Brooklin we follow standard lending guidelines when determining the mortgage amount you would qualify for.  Depending on your circumstances, gross debt service ratio (GDS) cannot exceed 32 to 35% of your gross household income consisting of your mortgage payment, property taxes, 50% of condo fees and heat.   As well, your total debt service ratio (TDS) cannot be more than 40-44% of your gross household income, which includes GDS plus (but not limited to) any other loan, credit card or support payments you may have.

As a purchaser you should consider a number of other factures that determine affordability.   This can easily be achieved through a household budget which includes all your day to day living expenses.  Here is an example of Family A and Family B which both have the same income and their gross and total debt ratios are exactly the same.  However, Family A has 3 children, 2 in full time daycare, 1 in rep hockey and they travel twice a year to abroad.  Family B has no children, they are home bodies and enjoy scoping out deals at the flea market.  Both these families have completely different expenses outside the cost of their home.

It is extremely important to look at your desired lifestyle when budgeting for a new home purchase and an experienced mortgage broker will help ensure you do not end up a cash strapped home owner.  For mortgage rates visit me at www.durhambestmortgage.ca