Can I Buy a House? Common Mortgage Myths First-Time Buyers Should Know
If you’ve ever wondered whether you’re ready to buy a home, you’re not alone.
One of the biggest things holding people back from homeownership isn’t necessarily their income, down payment, or credit score…it’s misinformation.
Every week, I talk to people who assume they can’t qualify for a mortgage because of something they’ve heard from a friend, family member, or social media. The reality is that many first-time buyers are much closer to homeownership than they think.
Let’s clear up a few of the most common mortgage myths.
Myth #1: You Need 20% Down to Buy a House
This is probably the most common misconception I hear. In Canada, many homebuyers can purchase a home with as little as 5% down, depending on the purchase price and their qualifications. While a larger down payment can have advantages, waiting years to save 20% may not always be necessary. For many buyers, getting into the market sooner can make more sense than waiting until they have a perfect down payment saved. Every situation is different, but don’t assume you’re years away from buying just because you don’t have 20% down. Many buyers (specifically first time buyers) can qualify with as little as 5% down.
Myth #2: You Need Perfect Credit
Many people believe that if their credit score isn’t excellent, they have no chance of getting approved. While credit is an important part of the mortgage process, it’s not everything:
Lenders also look at factors like:
– Your income
– Your employment history
– Your debt levels
– Your down payment
– Your overall financial picture
I’ve spoken with clients who were convinced their credit wasn’t good enough, only to discover they had more options than they expected.
Myth #3: Student Loans Automatically Disqualify You
Having student loan debt doesn’t automatically prevent you from buying a home. What matters is how your debt fits into your overall financial picture. Many homeowners carry student loans while successfully qualifying for a mortgage. Lenders will consider your monthly debt obligations alongside your income and other financial commitments.
Long story short – student debt is workable with the right mortgage.
Myth #4: You Need to Be Debt-Free Before Buying
If this were true, very few people would ever become homeowners. Most Canadians carry some form of debt, whether it’s a car loan, student loan, line of credit, or credit card balance.
The key is whether your debt levels fit within lender guidelines, they are all different. Certain lenders will consider something called “extended ratios” for the right mortgage products (more about ratios below).
Myth #5: If One Bank Says No, That’s the End of the Road
A mortgage decline can feel discouraging, but it doesn’t always mean homeownership is out of reach. Different lenders have different guidelines, and there are often multiple ways to structure a mortgage application. It’s all about finding the right lender for your specific situation.
So, Can You Buy a House?
The truth about this question is that it really depends on your personal situation, however if your debt ratios are aligned, the odds are that you’re probably closer to home ownership than you think.
What are your debt ratios? Debt ratios compare your monthly income to your current debt and cost of living. In mortgage applications there are 2 important ratio numbers we look at:
TDS (Total debt) and GDS (Gross debt).
Think of GDS and TDS as lenders asking:
“Can you realistically afford this house without stretching your budget too thin?”
GDS = Gross Debt Service
This looks at housing costs only.
Lenders add up:
- Mortgage payment
- Property taxes
- Heating costs
- 50% of condo fees (if it’s a condo)
Then they compare that total to your gross (before-tax) income.
Example:
You earn $6,000/month before tax.
Your housing costs are:
- Mortgage: $1,800
- Property tax: $300
- Heat: $100
Total = $2,200
GDS = $2,200 ÷ $6,000 = 36.7%
A lender wants to see that your housing costs don’t take up too much of your income.
TDS = Total Debt Service
This looks at all your debt payments, including housing.
Lenders add:
- Mortgage payment
- Property taxes
- Heating costs
- Condo fees (if applicable)
- Car loans
- Student loans
- Credit card minimum payments
- Lines of credit
- Any other monthly debt obligations
Example:
Same income: $6,000/month
Housing costs = $2,200
Other debts:
- Car payment: $400
- Student loan: $200
Total debts = $2,800
TDS = $2,800 ÷ $6,000 = 46.7%
