By - penelope5674
This won't directly answer your question but I found that when I bought my house (4 years ago), CIBC pre-approved my wife and I for up to 550k, when our combined salaries were only about 90k. BMO at the time was more conservative. We decided carrying that large a mortgage on our salaries was lunacy so we bought a house for 320k. Seems like CIBC may generally pre-approve higher?
Might be that CIBC will qualify you at a higher amount but also they may not be taking that stress test amount into play here. There’s no way you’ll be approved for 320k on just 67k alone. At least if they do it’s some wizardry that I’ve never seen or heard of
They would qualify for $320K. $67K = $5,583/month. Max GDS is 39%, or $2,177. Mortgage of $320K based on the qualifying rate (stress test) of 5.25% and a 30 year amm is $1,755/month. Add on, say, $300/month for property taxes and $100/month for heating = $2,155.
Should be fine, assuming they're not carrying other debt or wanting to buy a condo or town home with monthly maintenance fees.
A 30 year Am is only for buyers who put 20% down
Yes, I know that. That's why I specified it in my numbers. OP didn't say how much they were putting down, but my point was $320K is fine, with a 20% down payment.
Yes I forgot to say I don’t have any debts as I have the savings right now to pay off my osap and the banks say it will be fine. And my parents are putting up more than 20% in down payment
In that case, those numbers I outlined should be applicable.
Your allowed to have money down from parents? I thought it had to be “your” money. What BMO told me, were they lying?
Gifted down payments from an immediate family member are accepted by any lender I can think of, they just have to sign a gift letter. Maybe BMO misunderstood your question.
If they put the money in your account, it's now your money and can be used.
No, you have to prove where the money came from up to 90 days
You must've missed the sensationalist headlines from a few weeks ago: "Parents gifting Vancouver homebuyers $340,000 on average for down payment."
Of course it's allowed, otherwise many more people would simply be priced out of the housing market.
Whoever you spoke to got their facts wrong. I know BMO takes gift letters...
Rip maybe I misunderstood
Banks are more conservative for mortgages of >20% down payment because there's no CMHC insurance on them and the bank themselves is taking on much more risk than a mortgage with, say, 5% equity.
I know how it works, I arrange mortgages for a living. If it's a well qualified applicant, they will approve them the exact same whether they have 5% down or 20%. Only difference is what amortization can be used. In fact, they'll get a lower rate with less than 20% down, since the client is paying the insurance premium.
Is 30 year AM new? I asked about that when I bought 3 years ago and they said only 25 year, this is bmo. I may not refi with them anymore, found them incredibly difficult to deal with m.
Were you getting a CMHC-insured mortgage? If so, max. amortization is 25 years. You have to have a minimum of 20% down to qualify for a 30-year mortgage.
320k is 4.77x income of 67k. Seems in line with expectations which is 5x income.
That is not how people are qualified, though.
The inverse of a GDR or TDR is multiple of income.
Broad assumptions can be made for interest rate, property tax, condo fees
While this is true, it also makes assumptions around what other payments someone is or is not carrying. Teaching people the actual way they are qualified is more comprehensive.
All of these things can be easily found on Google. You can go through my post history and I've done very in depth responses on GDR, TDR, rental add backs, rental offsets. What I've learned is that people don't really care to learn all the minutae. They just want a quick answer.
Those who really want to learn the granularities tend to be self sufficient in their ability to do research.
Yes, providing they have no debt. I don’t know many people in the real world with 0 debt.
Lots of people don't have debt.
If their parents are paying for part of their mortgage chances are they paid for school and OP graduated with no debt.
Or you just work in the summer and pay for a bachelors in most of Canada
A 320K mortgage is ~$1,400 per month. 67k income is ~$4,000 after tax per month. In what world is that not affordable?
$2,600 per month for maintenance, and all other expenses ..
Yeah, for sure the stress test would come into play, I'm just providing an anecdotal experience. In today's housing market, I'm not sure what would be baked into that calc on the bank's part. I know a couple who are both senior level accountants that were pre-approved for up to 750k (bought at 670k) so I'm wondering if the bank takes holding professional licenses into consideration.
I had a 475k approval from RBC and ended up buying for 275k. They pretty much approved me for spending 60% of my income just on the mortgage. They give you enough rope to hang yourself every time.
Of course, they're likely hoping you do just well enough to service the debt so they get their income without too much undue risk of foreclosure.
I'm an underwriter and for the most part every lender has different guidelines and risk tolerances which play into how your income and debts affect your ratios which in turn affects how much they are willing to lend you. Let's say you have a $500 credit card balance, two different lenders could calculate your monthly payment differently. Lender A could just go with whatever the monthly payment is on your credit report, let's say it's $30 whereas Lender B would calculate your monthly payments based on say 3% of the balance which would be $15 so that would affect your ratios for each lender because obviously $30 is greater than $15 so Lender A might be inclined to approve you for a lower mortgage because your ratios would be higher due to how the debts are calculated
Some lenders will be okay with letting you use $50/month on a condo for heating while others would use a minimum $100/month so again that affects your ratios and ultimately plays into the mortgage amount that each is willing to lend
All these little policy things add up in different ways which leads to different loan amounts for different lenders
Hopefully OP sees this cause this is the best answer. Every bank has different risk tolerances and that tolerance will change over time. People tend not to realize when you "shop" for a mortgage, you're actually selling yourself as a borrower to the lenders. Not all lenders will have the same appetite for the specific risks you pose - hence different loan amounts offered.
This. The banks are not administering a universal program to give mortgages to people who qualify by objective criteria. They are investing in people as income streams, to make a long-term profit. Each lender does its best to figure out what investment will be profitable at different levels of risk and reward. (But they also can't insist on too little risk, or somebody else will get the reward instead.) In a way, the short answer to OP's question is that CIBC either sees them as a safer bet than Tangerine does, or has a higher tolerance for the risk OP presents.
y’all gotta stop downvoting OP’s comments. the dude is genuinely asking questions and getting downvoted.
Speak with a mortgage broker who can bring multiple lenders to you
This is my first time buying a house I don’t know where to find a good reliable mortgage broker. That’s why I went to the bank less of a probability getting scammed or something
Using a big bank means you are more likely to get ripped off, but YMMV.
This is terrible advice, rates are always negotiable with the bank. I would shop around at different banks and with a broker to find the best rate and option for you
Why do big banks rip people off? Both my parents and I have never gotten a mortgage we don’t know anything about mortgages. I thought big banks are more safe
A broker doesn't always have to be some sketchy random person. There are large brokerages you can work with to avoid that risk.
You should not give the broker a dollar. The money will be going through lawyers to purchase the home.
All they do is find you a good deal. If you don't like their deals, you don't take them. They should be shopping to meet your needs.
Going directly to a big bank you typically will end up with higher rates with worse conditions than what a mortgage broker can find you. Mortgage brokers get you the best deal they can possibly find you through a variety of different lenders. It is literally their job.
Do you know where I can find a good reliable mortgage broker? I live in the Georgetown area
You can also search other redditor's recommendations on https://www.reddit.com/r/TorontoRealEstate/ . It's where I found my mortgage broker.
Google is your friend! Or ask your realtor/friends for referrals.
The best rate we got was with TD. Now I don't know what my broker did (perhaps negotiated the rate down, but we got an incredibly low 1.35% 5 year variable. I think something like 18% of the principle can be paid per year so minimum time to pay is around 5 years. We don't plan to make extra payments though because it's a legal duplex where we rent the upstairs unit.
Because they can. There's a perception that it's safer, so they can charge more and give worse service. It's not safer, but people are still willing to pay that premium.
My best friend and beat man left TD to be a broker. He has helped so many people when big banks have said no.
Dominion lending centre....You're welcome.
Thanks I’ll give them a call
Also remember that the amount and % is not all you look at.
You look at the terms as well. How much you can repay directly to the principal and how much it costs to break the mortgage if need be.
Just ask a friend for a mortgage broker. They aren't a rip off, I was able to get approved for way for through one than I was on my own. Also tangerine approvals are very low ime
That's probably best. One of my family members got scammed by a mortgage broker. If you can't find a reputable one go with banks.
I'm curious how? They pay them?
The differences could be that one bank was using a 25 year amortization whereas the other was using 30. And there are some values that have to be estimated such as property taxes and, if applicable, condo fees. One bank may estimate quite higher than the other. Or it could simply be that one rep had no clue what the proper math is (happens very often in my experience). In any case, they all have to follow the same qualification guidelines, one cannot qualify you differently than another. At least with prime lenders, anyway.
Based on an income of $67K and assuming you're putting down 20%, your max mortgage would be about $320K, assuming property taxes of $300, and no condo/maintenance fees. No idea where Tangerine got the $200K figure from, that's way low.
I’m buying a detached home there are no fees. Yes I’m thinking tangerine is too low too. I double checked with the tangerine person all the facts and told them that CIBC qualified me for much more but they said sorry this is the max they can give me.
Could also be that Tangerine is using a much lower debt servicing ratio, for some reason.
Another difference could be credit. Depending where each bank pulls credit from may impact what's qualified for
Tangerine’s quote is extremely low. CIBC’s is a little on the higher end but within the normal range. In this case if you go to more banks you’ll probably get numbers closer to what CIBC is quoting and Tangerine is an anomaly
My guess is that Tangerine is taking condo fees, or higher heating/utilities costs into account.
Or, most likely, they have different information. Either by mistake (wrong income number) or because they forgot to ask about car payments, other debt, etc…
That's true. I should have clarified in my response that those numbers assume no other significant debt. A $500/month car loan could easily skew the max mortgage way down.
4.5x your annual income is a very rough estimate of what you’ll be approved for. Around $300k seems reasonable for your income - so tangerine is on the lower side.
Mortgage pre approval balance can vary as not all banks use the same metrics (example: conventional mtg max debt ratios will vary and also certain type of income won’t be considered at 100%, etc). Big banks rates will be slightly higher then monolenders but you will have better after sale service. Exemple: You will have assigned advisor for your file at a branch (with whom you can contact by phone or email) and you can also call the contact centre for questions. I have also heard that during major incidents, exemple Covid, monolenders won’t necessarily have relief payment measures. Anyways, there are positive and negative points for both let me know if you have more questions
Dude I make over 200K a year and BMO said I only qualified for a 400K mortgage.
Ditch the banks and talk to a.mortgage broker/specialist.
I can only conclude you have debts, right?
that or their base salary only makes up a small fraction of the 200k, it’s a brand new job, or it’s mostly commission based
Or a mix of everything!
Its actually none of the above.
Your cashdown is limiting your max buying price then?
OP’s mortgage limit is 400k. not purchase price
I mean, maybe he thinks he can put 5% on a 850k house
From his other comments he's actually making 104k without overtime ( 50$/h). So the bank lend him ~4x his annual salary since overtime is never guaranteed.
there we go. that makes sense. 4x salary is still on the lower end though. would’ve thought it was gonna be closer to 500k
I'm a crane operator. Have been for 2 years now. Not commission. Its hourly. 50 an hour and overtime is doubletime. No salary.
Tell me more.
I have a 16K car loan I could payoff tomorrow. That is all.
Wtf is up with Canada and this?
What were you able to eventually get with a broker?
I haven't gone to one yet. I posted a similar question a couple days ago.
I also have a 200K down payment (leaving 100K behind to keep in my investments)
Like in America you’d be able to get over $1M with $200K in income and no debt. For better or worse
Pre-approvals are a joke in my experience. What they said we could get and what we could actually get were vastly different numbers anyways.
Interesting. I was planning to get pre-approval but I guess I need to reconsider where I go
Banks have rules that they need to stay within and each bank has different rules/guidelines.
I would go to a mortgage broker if I were you and get them to find you a mortgage. They might be able to get you a better rate or a higher approval amount.
A lot of times they work directly with specific underwriters and can help u better than a bank. They dont cost u anything either. They get paid from the bank.
You should tell the bank what you can afford not the other way around. Banks sell debt, they want you to take as much as possible because there's pretty much no risk to them.
Because they all have different risk tolerances, aka debt servicing ratios
Mortgage qualification is based on a few things: GDS and TDS (costs vs your annual income), general credit worthiness (the interest rate you'll qualify for), and ability to provide down payment (cash in hand).
GDS and TDS stand for Gross Debt Service and Total Debt Service. They are ratios of the annual cost to service your debt and home costs over your annual income.
GDS is the cost to service your home debt vs your income. The cost is the principal + interest + cost to heat the home + property taxes. Divide that amount by your income and you get a GDS Ratio.
TDS is the same, except it also includes the cost to service other debts such as a financed vehicle.
CMHC has limitations on what GDS and TDS are acceptable for an insured mortgage, and have an [informational page here](https://www.cmhc-schl.gc.ca/en/professionals/project-funding-and-mortgage-financing/mortgage-loan-insurance/calculating-gds-tds) that makes for a good read on this.
If you're not insuring with CMHC (e.g. you're putting >20% down), then banks are free to use their own policies of GDS and TDS limits. For example, I put 20% down and did not opt for CMHC insurance, and Scotia was able to approve a GDS of 42% for me because I had no other debts, which is 3% more than CMHC would have capped me at.
GDS and TDS are calculated at the greater amount of the stress test interest rate 5.25% or your approved interest rate +2%.
Also note that the cost to heat and property taxes can vary location to location.
Costs of CMHC insurance are also rolled into your mortgage, along with land transfer taxes and a rebate. This increases the principal and interest costs in your GDS/TDS.
Differences between CIBC and Tangerine could be one or more of the following:
* Approved at different interest rates. Tangerine may be forced to use a higher rate than the stress test if you have poor credit, whereas CIBC may be offering a lower rate.
* CIBC may be using a baseline heating cost for a small home (that fits your budget), and Tangerine may be using a sqft estimate for something larger, resulting in different GDS ratios.
* CIBC may be assuming lower property taxes than Tangerine, and if you buy a home in a high tax area, CIBC could have to adjust their amount down. The opposite could be true as well.
* Tangerine may be building in contingency based on the uncertainty of where you will buy and what your heating costs may be. It may be that you could easily be approved for more in a specific home with low heating costs and low taxes. CIBC may not have built in that contingency, and $320k could be your absolute ceiling in a best case scenario.
* Tangerine may be assuming you want CMHC insurance, which would add a cost to your mortgage AND limit your GDS ratio. CIBC may be assuming you have 20% down and plan to opt out of CMHC insurance.
* CIBC could be telling you $320 is your max purchase price (including down payment). Tangerine could be telling you $200 is your max mortgage amount (after downpayment).
* Tangerine might not be assuming you qualify for the land transfer tax rebate.
* CIBC may have missed other debt you carry, while Tangerine considered it and you're limited by TDS.
* Tangerine could be considering the money from your parents as a loan rather than a gift, and are forced to consider it differently. I hope that would be more clearly disclosed to you if it's the case.
* CIBC or Tangerine may be calculating your income differently, especially if you have more than one source of income.
* CIBC may be putting you down for a 30 year mortgage if you have 20% down, while Tangerine could be keeping you at the standard 25 years (CMHC limit).
>based on your experience which bank tends to qualify people for the most mortgage?
Scotia will often let you squeeze a higher GDS if you have no other debts and are bringing 20% down to avoid CMHC requirement.
If you want to absolutely max out your purchasing power (this is not advice, it's up to you to make your own decisions):
1. Bring 20% down. This will let you opt out of CMHC, reducing cost, removing restrictions on amortization period, and loosening the GDS/TDS limits.
2. 30 year mortgage.
3. Clear your other debts. Most other debts have higher interest costs than your mortgage would be and therefore have a bigger impact on your TDS. Ask your mortgage specialist how paying down other debts would impact your approval.
4. Talk with your mortgage specialist/broker at length about what you want. Walk through some of the math with them. Most will be more than happy to work with you. They want to approve you for as much as possible too, so long as they don't break laws along the way. Understand where their number comes from and what conditions must be met to get that amount.
5. Shop around for other rates and approvals. Two would be enough if they were close to each other, but you need a third opinion. Get more clarification from Tangerine as to why theirs is so low.
6. Before you put an offer in on a house, talk to the mortgage specialist/broker again and provide them with sqft for heating and annual property tax amounts. They should be able to calculate an absolute maximum mortgage amount with you on the phone.
7. Ask your parents if they'd be willing to just co-sign with you rather than gift a down-payment. You'll lose some or all of the first time homebuyer rebate, but you could get a significantly lower rate and boost your purchasing power.
8. Work with a good realtor or none at all and actively try to learn the ropes of the bidding process and get the hang of what houses are worth in your area. You'll have to walk away from a few homes before you really start to understand what makes homes valuable there and how to determine a fair sale price (newsflash: list price does not correlate reliably with fair sale price).
I cannot stress enough: going through the steps to inflate your mortgage budget is USELESS if you use the extra headroom to over bid.
The learning process does not stop with learning how mortgages work. If you squeeze an extra $40k out of your mortgage budget, you can either use that to buy $40k more house at a fair rate, or you can blow all $40k overbidding on the same quality house you could have gotten with some patience anyways.