Steven Crews
(403) 870-2669

# How Much Income do I Need to Qualify for a Mortgage?

When I sit down with a client, we always talk about how much mortgage you qualify for. To do that, we often come from two perspectives. The first is how much income is required to qualify for a certain mortgage amount. The other perspective is how much mortgage does my income qualify for.

To calculate income required to qualify for a mortgage amount, we first estimate a few home expenses. We estimate the property tax & heating costs (\$150/month) & half the condo fees (if applicable). We then take your gross income and multiply by 39% and subtract the home expenses. This leaves the mortgage payment (P&I) that lenders use for affordability. With the P&I payment, we can then determine the mortgage that you will qualify for.

This all sounds a little cumbersome, therefore we have created a calculator that can help you with these calculations. Let's review some details before we play with the calculator.

## How much income do I need to qualify for a mortgage?

There are lots of numbers going on with these calculations. I'll describe some of the details, but if you just want to get to it, click here to scroll down to the calculator automatically.

I designed this tool to take a specific income, that you input, to calculate the amount of mortgage that you could qualify for. You will see that result on the left side of the results.

I also designed the tool to calculate the purchase price you could qualify for based on your income. To calculate this fairly accurately, you must provide the down payment you have, the estimated property taxes for a home with this purchase price, and the condo fees (if applicable).

The calculation is based on today's benchmark rate. All lenders must use the benchmark rate to qualify mortgage applicants.

One important note, if you have 20% down or more, Lenders will use a benchmark rate that is equal to 2% more than the rate you receive. For our purposes, this calculator will use the Bank of Canada Benchmark.

If you want a more accurate number, connect with us. (Fill in the calculator, provided your name, email and cell number and we can chat)

Input Information to Calculate How Much You Can Qualify For Based On Your Income

Annual Income: Input your annual income before taxes.

• If you are a salaried employee, then use that number.
• If you are paid hourly, then take your hourly rate of pay and multiply by your guaranteed hours per week then multiply by 52 weeks. For example. \$22/hour x 40 hours/week x 52 weeks/year = \$45,760
• If you are self-employed, then use a 2 year average of your income. Find line 150 on your Income Tax Return for the last 2 years, add them together and divide by 2.
• If you are a commission employee, then you would use a 2 year average of your income. You could average your last 2 years of T4 slips or use a 2 year average of line 150 of your Income Tax Return
• If you are on salary plus bonuses, you can use your base salary or use a 2 year average of your income, as described above.

Down Payment: Choose a percentage that you would have down. You can play around with this number after you have completed the other calculations. The minimum down payment is 5%, start with that, then you can move that up if you wish.

Interest rate: Input an interest rate. This rate is used on the right side of the results to provide an estimate of the mortgage payments. The calculation uses the benchmark rate, therefore the rate you choose will not change the mortgage amount you qualify for.

Mortgage Term: Input any number from 1 to 5. This represents the time the interest rate would be set for. Many people choose a 5 year term when they set up a mortgage, but you don't have to.

The term is used to calculate how much mortgage is remaining when your term is over. This answer is on the right side of the results

Mortgage Amortization: Input any number up to 25 years. It is possible to choose an amortization up to 30 years when you have 20% down or more, however rates are different and qualifying criteria is different.

The amortization will affect how much mortgage you will qualify for. For our purposes here 25 years is the best number to start with. If you want more details and options, complete the form and connect with us.

Estimated Annual Property Taxes: Enter a number for annual property taxes here. This number will affect how much you mortgage your income will qualify for.

If you aren't sure, use 3% of the annual income. Once you see the purchase price on the right side, you would change this number to a closer number.

If a lender doesn't know what the property taxes will be, they estimate 1% of the purchase price. Some municipalities are much less than this, some are more.

Estimated Monthly Condo Fees Enter a monthly condo fee if you may be considering a condo to purchase. If you are purchasing a home, then enter zero.

If I'm not sure about condo fees, I would use \$250/month for a townhouse style condo and \$400/month for an apartment style condo. Again, once you see the purchase price on the right side of the calculator, you can play around with the numbers.

If you have questions a bout the numbers you are getting or want a something more official, fill in your contact details and we can connect.

## How do I read the results?

Our calculator will provide 2 answers:

• Qualifying Mortgage Amount
• Maximum Purchase Price, based on the qualifying mortgage amount

Qualifying Mortgage Amount: The answer on the left side will be a summary of the data you input. You will see the calculation of the Principle and Interest (P&I) payment that is used. The final number is the mortgage that your income will qualify for based on the information you provided.

Maximum Purchase Price: The answer on the right side, will summarize the purchase price you could qualify for based on the calculated qualifying mortgage amount.

With that purchase price, we then summarize how the mortgage amount would be calculated. We provide the Principle & Interest (P&I) payment based on the interest rate you input. You also see what the mortgage balance would be at the end of the term.

Once you receive your first result, then you can go back and modify some of the numbers. I do this all the time. Sometimes I over estimate the property taxes, sometimes I underestimate them.

The calculator is quite fast, you can make changes and the results update quickly.

## What if I have debt, will this affect the calculation?

Yes. There are some factors that allow you to have some debt when you purchase a home. You certainly don't have to be debt free when you purchase.

This calculator does not factor in debt. The reason I didn't include debt with the calculator is because there are a bunch of guidelines and rules related to the payments used to calculate your qualifying numbers.

If you want an accurate calculation of how much you qualify for based on your actual income, your debt, etc., fill in the contact details and we can connect to review everything.

## Summary

I'm really excited to be able to provide this tool to you. I do this calculation for clients ever single day. There are guidelines and rules that lenders use and this tool isn't perfect, but you can get a really good idea about where you sit and how much mortgage you qualify for based on your income.

If you have questions or suggestions, please connect with me. I'm happy to chat.

## Video Tutorial

Image Source - Stephanie & Danny in their new home.

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