First-Time Buyer Mortgage Planning Guide › Chapter 6
How much can I actually afford?
By Rajiv Verma, Mortgage Broker · Mortgage Architects, FSRA Brokerage Licence #12728 · Updated November 3, 2026
Short answer: your approval depends on your income, your debts and the stress test, not just the payment you feel comfortable with. Every insured buyer, and most bank borrowers, must qualify at their rate plus 2%, or 5.25%, whichever is higher. And your monthly debts can cut your borrowing power faster than most people expect.
How do lenders decide how much I can borrow?
Lenders use two ratios, calculated at the qualifying rate, not your actual rate:
| Ratio | What it includes | Typical limit (insured) |
|---|---|---|
| GDS (gross debt service) | Mortgage payment, property tax, heating, half of condo fees | 39% of gross income |
| TDS (total debt service) | Everything in GDS plus car loans, credit cards, lines of credit, student loans | 44% of gross income |
How much do my debts really cost me?
Example: $120,000 household income, $5,000/year property tax, $150/month heating, example qualifying rate 5.70% (as of November 3, 2026), 30-year amortization (available to first-time buyers). In this example, the debt ratio (TDS) is the limit that bites.
| Monthly debt payments | Maximum mortgage (approx.) |
|---|---|
| $0 | $574,000 |
| $800 (car loan) | $523,000 |
| $1,200 (car loan + card and line minimums) | $454,000 |
Nobody told me this
In this example, a $1,200 monthly debt load cuts your borrowing power by about $120,000. Paying off a car loan or a line of credit before you apply can do more for your budget than months of extra saving.
Why is my car payment cutting how much house I can buy? →
Why is my real approval lower than the online calculator?
Most online calculators use your actual rate, skip the stress test, or ignore property tax and debts. Lenders use all three. That’s why your pre-approval can come in lower.
The online calculator says I can afford more →
What does owning really cost each month?
Your mortgage payment is only part of it. Here’s an example for an $800,000 home with 10% down, insured, 30-year amortization, at an example rate of 3.70% (as of November 3, 2026). Your numbers will differ, so replace these with your own.
| Monthly cost | Example |
|---|---|
| Mortgage payment (5-year variable example) | $3,423 |
| Property tax (example: $6,000 a year) | $500 |
| Home insurance (example) | $150 |
| Utilities: hydro, gas, water (example) | $350 |
| Maintenance set-aside (rule of thumb: about 1% of the home’s value a year) | $667 |
| Total monthly cost of owning | $5,090 |
Condo? Add your monthly condo fees, and check what they include.
Nobody told me this
In CMHC’s 2025 Mortgage Consumer Survey, 65% of first-time buyers paid the most they could afford, and 44% of first-time buyers faced unexpected costs during the purchase, most often legal fees, immediate repairs and home inspections. Budget for the full monthly cost, not just the mortgage payment, and leave room for surprises.
Can a basement apartment help me qualify?
Often, yes. Many lenders and insurers will count some or all of the rent from a second unit in your home toward your qualifying income (for an owner-occupied two-unit home, insurer rules can allow up to 100% of the rent), which can raise how much you can borrow. The rules vary by lender and insurer: how much of the rent counts, whether the unit must be legal, and what proof is needed (a lease, an appraiser’s rent estimate, or rent history). It’s common in Brampton, where second units must be registered with the City. A legal, registered unit gives you the most lender options, so check before you make an offer.
Will the rent I collect help me qualify? →
What about variable vs fixed?
A lower rate means a lower qualifying rate, which can increase your borrowing power. Chapter 5 shows the example. Choose variable only if your budget can handle a higher payment later.
What should I do, and what should I avoid?
Do: pay down debts before you apply · budget for property tax, heating, condo fees and home insurance · stay below your maximum approval
Don’t: take on a car loan before buying · assume the online calculator is your budget · borrow to the limit just because you qualify
Frequently asked questions
What are GDS and TDS?
Two ratios lenders use. GDS covers your housing costs; TDS adds your other debts. For insured mortgages the usual limits are 39% and 44% of gross income.
Should I pay off my car loan before applying?
Often it helps more than extra saving. Run both options with me before deciding.
Does the stress test apply to everyone?
Every insured buyer and most bank borrowers. Some credit unions and private lenders use their own rules.
Next up · Chapter 7Rajiv, what rate will I get?Continue reading →
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Rajiv Verma, Mortgage Broker · Mortgage Architects, FSRA Brokerage Licence #12728 · 15 Gateway Blvd, Unit 201, Brampton, Ontario · Office 289.505.0631 · Direct 647.291.7116
This guide is general education, not personal financial, legal or tax advice. Rates shown are examples as of November 3, 2026, for comparison only, and are not a quote or a commitment to lend. Your rate and approval depend on your application, credit, income, property and lender guidelines. Program rules can change.