How much mortgage debt can an applicant afford?
For the GDS calculation, the applicant must not use more than 32% of his/her gross family income towards paying the principal, interest, taxes and heating (and 50% of condo fees if applicable.) For the TDS calculation, the CMHC states that the principal, interest, taxes and heating, plus other debts including payments on borrowed downpayment, must not exceed 40% of the gross family income. The applicant must meet CMHC debt service criteria in order to qualify for mortgage insurance. Zero Down Payment In addition to the traditional 5% minimum downpayment requirement, CMHC’s flex down program allows the 5% downpayment to come from different sources such as lender cash back incentives, lines of credit/credit cards, arm’s length personal loans or gifts, and 100% sweat equity from either the borrower or another party who is in an arm’s length position for the purchase transaction. Payments on borrowed funds must be included in the TDS calculation. Recently, CMHC also allows 100% financing o
