How lenders decide how much you can borrow
1. The stress test
Every federally regulated lender must qualify you at the greater of 5.25% or your contract rate + 2%. For example, if your rate is 4.29%, you must qualify at 6.29%.
2. Gross Debt Service (GDS) ratio: max 39%
Your mortgage payment (at the stress-test rate) + property tax + heating + 50% of condo fees, divided by your gross monthly income.
3. Total Debt Service (TDS) ratio: max 44%
Everything in GDS plus your other debt payments: car loans, student loans, and 3% of credit card and line-of-credit balances.
4. Down payment & credit
Your down payment sets the maximum price (see down payment requirements). A credit score of 680+ gets you the best insured rates.
Some lenders and alternative programs use more flexible ratios. If the calculator result is lower than you hoped, talk to us. There are often options.