It’s the first question most buyers ask. Your approval amount comes down to four things.
1. Your income
Lenders use gross (before-tax) income. Salaried income is straightforward. Self-employed, commission and rental income are usually averaged over two years.
2. Your debts
Car loans, student loans and credit cards reduce what you can borrow. Credit card and line-of-credit balances count at 3% of the balance per month, even if you pay less.
3. The stress test
You must qualify at the greater of 5.25% or your rate + 2%. Your housing costs can’t exceed 39% of income (GDS), and all debts 44% (TDS).
4. Your down payment
Your savings set the maximum price: 5% on the first $500,000, 10% on the portion up to $1.5 million, and 20% above that.
Quick estimate
Try our Mortgage Approval Calculator for an instant estimate, then apply for a pre-approval to get a firm number from a lender.
Tip: paying off a credit card or car loan before you apply can increase your approval more than you’d expect.