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Qualification

Debt service ratio

Definition

The percentage of your gross income that goes to housing (GDS) or to housing plus all other monthly debt payments (TDS).

On insured mortgages, CMHC caps GDS at 39% and TDS at 44%; the ratios are calculated at the stress-test qualifying rate.

Debt-service ratios are the core affordability test. GDS counts just housing (mortgage principal and interest, property tax, heat, and half of any condo fees); TDS adds every other monthly debt. Insured files must fit under 39% GDS and 44% TDS (CMHC); uninsured lenders set their own limits, often similar, and alternative lenders may allow more.

They're calculated against the higher stress-test qualifying rate, not your actual rate, so the payment you're tested on is bigger than the one you'll pay. That's why your approved amount comes in below what your real payment could cover.

The fastest way to improve your ratios is to clear or lower other monthly obligations before applying — paying off a car loan can free up more borrowing room than saving a few thousand more for the down payment.

Sources

  1. Calculating GDS / TDS (CMHC)
  2. Guideline B-20: Residential Mortgage Underwriting Practices and Procedures (OSFI)
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Co-signer

A creditworthy individual (often a parent) who agrees to be equally liable for the mortgage so the primary applicant qualifies. The co-signer's income is added to the application; their credit is fully exposed.

Credit score

A 300–900 score from Equifax or TransUnion summarizing your credit history. Roughly 680+ opens the widest range of A-lender options; CMHC-insured mortgages need at least one borrower at 600 or higher; lower scores usually route to alternative (B) lenders.

Down payment

The cash you put toward the purchase. Minimums: 5% on the first $500K and 10% on the portion from $500K to $1.5M; at $1.5M or more, 20%. Below 20% requires CMHC, Sagen, or Canada Guaranty insurance.

GDS

Gross Debt Service ratio

Gross Debt Service ratio: your monthly housing costs (mortgage principal and interest, property tax, heating, and 50% of condo fees) divided by your gross monthly income. CMHC caps GDS at 39% on insured mortgages; uninsured and alternative lenders set their own limits.

Qualifying rate

The stress-test rate you must qualify at: the greater of your contract rate plus 2% or 5.25%. Doesn't change what you actually pay — only whether you qualify.

Stress test

The check that you could still afford your mortgage at a higher "qualifying rate": the greater of your contract rate + 2% or 5.25%. OSFI sets it for uninsured mortgages at federally regulated lenders, and the federal government applies the same test to insured mortgages. It limits how much you can borrow, not what you pay.