What is a Mortgage and How Do I Qualify

Everyone's first mortgage conversation is full of words nobody defined. Here's the foundation, in plain language, so every later decision makes sense.

The anatomy of a mortgage

A mortgage is a loan secured by the home itself. The amortization (commonly 25 years) is the total payoff schedule; the term (commonly 5 years) is how long your current rate and lender contract lasts. You'll renew several terms over one amortization. Each payment splits between interest (the lender's charge) and principal (your equity growing), early payments are interest-heavy, and the balance shifts your way over time.

The four things every lender checks

• Income: stable, provable earnings, pay stubs and T4s, or two years of tax returns if self-employed.
• Down payment: minimum 5% on the first $500,000 and 10% on the portion up to $1.5M. Under 20% adds mortgage default insurance (CMHC) to the loan.
• Credit: 680+ opens every door; lower scores narrow the lender list without closing it.
• Debt ratios: housing costs within ~39% of gross income (GDS) and all debts within ~44% (TDS), calculated at the stress-test rate of contract + 2% (or 5.25%, whichever is higher).

What the payment really includes

Beyond principal and interest, budget property taxes, home insurance, utilities and, for condos, maintenance fees. Lenders count most of these in your ratios; your budget should too.

Your first three moves

• Check your credit report for errors and get balances under 30% of limits.
• Open an FHSA and gather your income documents.
• Get pre-approved before you shop, a real budget, a held rate, and credibility with sellers.

From there it's a guided path: pre-approval, house hunt, offer, financing condition, closing. You don't need to memorize any of it, that's what we're for. First conversations are free, judgment-free and jargon-free.

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