How much home can you afford?

Lenders look at two ratios when determining how much mortgage you qualify for:

• Gross Debt Service ratio (GDS) — total monthly housing costs shouldn't be more than 39% of your gross household income
• Total Debt Service ratio (TDS) — total debt load shouldn't be more than 44% of your gross household income

In addition, the federal stress test may impact the mortgage amount for which you'll be able to qualify. Regardless of your actual mortgage rate, you'll need to prove that you can still afford your mortgage payments at a higher 'qualifying' interest rate (in case interest rates go up in the future).

If you find that your numbers don't match what you're hoping for, there are some ways you may be able to increase the size of the mortgage you can afford:

• Make a bigger down payment — wait longer to save more, look at first-time home buyer programs, forego a holiday, or make use of any family monetary gifts
• Increase your income — consider a side hustle, rent out a spare room, negotiate a higher salary, upgrade for a better position, or find a job that pays better
• Pay off your existing debts
• Improve your credit score
• Look into a longer amortization to lower your payments (depending on the lender)

When looking for a home or property, real estate agents and home sellers want to know that you're serious about purchasing. A pre-approval (vs a pre-qualification) is a written commitment from a lender (with conditions) that helps ensure you can afford the house or property that interests you. So, it prevents everyone, including you, from wasting time looking at or placing an offer on homes that you may not be able to afford.

A pre-approval also allows you to hold your best mortgage rate for up to 120 days (depending on the lender).

Your pre-approval can take anywhere from a few minutes to up to two weeks for particular situations (such as for self-employed applicants). Our expert brokers can quickly help you have a pre-approval in hand when house-hunting.

Read more: Get Pre-Approved in Minutes

A mortgage pre-qualification is a quick idea of what you may be approved for a mortgage loan based on a few financial numbers provided verbally (without sending any supporting documents).

A pre-qualification may be useful when you start thinking about owning a home, for budget purposes, and to get to know the mortgage process.

However, if you're serious about looking for a home, we recommend a pre-approval, which is a conditional lender commitment for the size of mortgage you may get.

Read more: Get Pre-Approved in Minutes