Learn About the Mortgage Stress Test

The Mortgage Stress Test was implemented to determine what a person can reasonably afford when purchasing a home. In the end, it’s meant to protect both you and your lender.

For first time homebuyers, the Government of Canada offers a First Time Home Buyer Incentive program – check with your mortgage specialist to see if you qualify.

To determine how much of a mortgage payment you can afford, you need to know 3 things:

1. Income

Your employment and credit histories are important factors when determining how much you might qualify for – they can provide a risk assessment snapshot.

2. Down Payment

The amount of money you’ve saved up to put towards purchasing a home is called a down payment. This amount is important in factoring how much you can afford and what type of mortgage you’ll qualify for.

If you don’t have a down payment saved, it is possible to borrow part of it from a lending institution, but keep in mind that amount will go towards your debt and could impact your total borrowing amount.

You may be able to receive a gift from a parent or grandparent – you simply need to prove that the funds are not repayable with a letter from the giver.

3. Debt

Assess any and all debt that you currently have – car loans, student loans, credit card balances, lines of credit. Anything that you make a payment toward needs to be included.

And once you’ve been pre-approved for a mortgage, DON’T purchase anything else on credit (especially big-ticket items). Your pre-approved mortgage can change if you incur new debt between pre-approval and final approval.

Above all, the first step you should be making is getting a mortgage approval. Your mortgage specialist will help you with the rest.