The amount of a mortgage for which one can qualify is generally founded in what are known as qualification ratios: Gross Debt Service ratio and Total Debt Service ratio, or “GDS” and “TDS”. Lenders evaluate one’s monthly income, as well as their monthly debt obligations, to determine a fair and feasible amount of mortgage available to the prospective borrower. This figure is calculated via their GDS and TDS guidelines. Generally, lenders will have an acceptable Gross Debt Service ratio ranging from 28-32%. In other words, 28-32% of one’s monthly household income can be reasonably set aside for one’s mortgage payment, in the eyes of the lender. Furthermore, most lenders will have an acceptable Total Debt Service ratio of 36-40%. In other words, 36-40% of one’s monthly household income can be reasonably set aside for one’s total debt obligations, including their impending mortgage payment. To calculate exactly how much you may borrow, please refer to our CALCULATOR available by clicking on the HOME tab above. Make sure that you incorporate the proper interest rate, as this can have a profound effect over the life of a mortgage. NOTE: As part of this calculation, you also need to estimate and include the property taxes, homeowner’s insurance, and CMHC fees (if applicable) you might need to pay, which are considered part of your monthly expense.

Commercial real estate financing can be a complicated matter, but it doesn’t have to be so long as the borrower does enough research beforehand. Sources for this type of financing include saving and loan institutions, mortgage banking firms, insurance companies, regional banks and private investors. The lender must take into consideration the types of risks that are inherent in each transaction and what the intended use is for the property. Both parties should consider the anticipated returns from the property as well as its location. A great business in a bad neighborhood is, in most cases, not a good investment.

Each one of these considerations is important and must be examined by the prospective business owner before applying for commercial investments. These might include retail operations warehouses or multifamily dwellings. Other lenders provide financing across-the-board for all types of commercial ventures. The key to beginning the whole financing process for the business owner is to have all of the paperwork competed and in order prior to approaching the lender. The bottom line is that lenders are most concerned about their risks. The borrower who has every base covered by clear and concise documentation will stand the better chance of being seriously considered for financing.

Before making a decision about whether or not to venture into a particular real estate financing situation, the lender will check to see if it demonstrates a solid income stream. They will want to know all about the management team, so their complete profiles should be prepared and ready to present. Anyone who is involved as an owner of the property will have to provide financial statements. The property will have to have been appraised and the written appraisal presented at the meeting between borrower and lender. If construction blueprints are available, those should also be presented to the lender. If the borrower does the necessary research and homework and has all of the required paperwork prepared and ready to present during the initial meeting, much of the red tape can be eliminated right away.