Last year there was certain advantages of buying your first home. Today, all salaried homeowners or home buyers are
allowed to spend up to 32% of their gross pre-tax income to pay for the mortgage payments inclusive of the property taxes,
heat and ½ the condo fees (if applicable). There no longer exists the first-time buyer exception. This formula is called the
"gross debt service ratio" or GDS for short.

Since most Canadians have other debts (IE. credit cards, personal loans, line of credit, car lease), the applicant(s) will be
allowed to spend up to 40% of gross (pre-tax) income on all debt payments, including the home. This latter formula is
called the "total debt service ratio" or TDS for short. In other words, alternate debt payments cannot be more than 8% (TDS
less GDS) of your gross income, if you want to maximize the home buying potential. If your alternate debt payments
exceed 8% of gross income, then the totals will impact upon the GDS. Here is an example: Gloria earns $100,000 per year.
If she had no outside debt, she would qualify for a mortgage of 330,000(1). She does have a car lease at $6000/year, a line of
credit limit of $15,000 (presently unused) which would cost her $5400/year, her RRSP loan is $6000/year, and she has
three major credit cards with credit limits of $5000 each, which would cost her $9000/year, if they were maxed out.
Because the mortgage system is a two tier system, with all these debt payments, the system would lessen the amount of
mortgage allowable to $166,000. If she canceled two of her three credit cards, and her line of credit, the amount of
mortgage allowable would jump back up to $288,000.

You are allowed to go to 32% GDS, as long as all your debt payments including the home do not exceed 40% TDS. There
are some other conditions, naturally, you must have good credit, and good job stability, with a salaried income. In this day
and age of attrition, more and more people are going in business for themselves, or taking jobs with commissioned
incomes. When it come to qualifying under the mortgage system, these new types of incomes are treated in a completely
different manner. Most lending institutions will insist on seeing your last three years' worth of income tax returns, or better
still, your Revenue Canada "Notices of Assessment" for the last three years. The income used will be the net taxable
income averaged out over three years. As an example: John is a commissioned sales person. He earned $100,000 last year
but because he needed his car for the job, he had to entertain to get business, and he had a home office, he was able to write
down his income to pay tax on only $50,000. The latter figure will be used to calculate GDS and TDS. Another example:
Fran works for herself as a babysitter. She has contracts with various parents amounting to $450 per week. After allowable
expenses, her business lost money last year. Since she is non-incorporated, her income of $23400 (that's $450 per week
times 52 weeks) is now non-existent, therefore, she cannot qualify for any amount under normal lending guidelines.

Since the employment picture in this country is dictating alternate means of earning income, several new lenders have
emerged to handle this niche. Since the business is there and there is little competition, rates are traditionally higher for non
salaried clients. Even those who write down incomes to zero, can now get financing. Again, your good credit history will be
a definite asset.
 

1.  Assuming a rate of 6.70%, amortized over 25 years, with property taxes at $4000/year, and heating costs of $1000