PMB competency 3 (LO 3.1-3.6): qualifying the borrower, underwriting and the file, commitments and conditions, closing costs and cost of borrowing disclosure, records, private lending and mortgage administration. Federal figures are those published in October 2026.
Real Estate Act Rules s. 72 requires the brokerage to disclose in writing the steps it took to verify the information in the deal (application, representations, identity of the parties) and to keep copies of the supporting documents in the file.
1. An applicant earns $96,000 a year (gross). At the qualifying rate, the proposed principal and interest is $1,850 a month; property taxes are $3,600 a year and heating is $120 a month. What is the gross debt service (GDS) ratio?
Under CMHC's requirements, GDS is principal, interest, property taxes and heating (PITH) divided by gross household income: ($1,850 + $300 + $120) x 12 / $96,000 = 28.38%. Leaving out heating gives 26.88%, leaving out taxes gives 24.63%, and counting only half the heating cost, as if it were a condo fee, gives 27.63%; only condominium fees are counted at 50%.
2. In residential mortgage lending, what does loan underwriting mean?
OSFI Guideline B-20 builds the credit decision on the borrower's identity and willingness to pay (Principle 2), capacity to service debt (Principle 3) and the property as collateral (Principle 4); weighing these to approve, decline or set terms is underwriting (PMB LO 3.2.1). Registration, securitization and rate shopping are other steps of the mortgage process.
3. A buyer of an Edmonton condominium unit earns $88,000 a year. At the qualifying rate, principal and interest is $1,620 a month; property taxes are $210, heating $90 and condominium fees $480 a month. Under CMHC's method, what is the GDS ratio?
CMHC's GDS includes PITH plus 50% of applicable condominium fees: ($1,620 + $210 + $90 + $240) x 12 / $88,000 = 29.45%. Counting the full $480 fee gives 32.73%, ignoring the fee gives 26.18%, and dropping the heating cost gives 28.23%.
4. A federally regulated bank approves a $420,000 uninsured mortgage (25% down) at a 4.24% five-year fixed rate with a 25-year amortization. Assuming monthly payments and semi-annual compounding, not in advance, what monthly payment is used to qualify the borrower?
OSFI's minimum qualifying rate for uninsured mortgages is the greater of the contract rate plus 2% or 5.25% (as of October 2026), so this loan qualifies at 6.24%. The payment on $420,000 at 6.24% compounded semi-annually over 25 years is $2,747.39. $2,264.27 is the actual contract payment, $2,502.86 uses the 5.25% floor, and $2,768.02 wrongly compounds the rate monthly.
5. A self-employed graphic designer applies to a federally regulated lender. Under OSFI Guideline B-20, which proof of income should the lender obtain?
OSFI Guideline B-20 (Principle 3) states that for self-employed borrowers, lenders should obtain proof of income such as the Notice of Assessment and T1 General, together with relevant business documentation. A letter from her own company or a signed statement is not an independent source that is difficult to falsify, and deposits alone do not establish income.
6. Gross annual income is $104,000. Monthly figures at the qualifying rate: principal and interest $2,050, property taxes $290, heating $115. Other debts: car loan $520, credit card minimum payments $180 and student loan $210. What is the total debt service (TDS) ratio?
CMHC defines TDS as PITH (plus 50% of any condo fees) plus payments on all other debt, divided by gross income: ($2,050 + $290 + $115 + $520 + $180 + $210) x 12 / $104,000 = 38.83%. 28.33% is only the GDS, 36.75% leaves out the credit card payments and 37.50% omits heating.
7. Under the Insurable Housing Loan Regulations, what maximum debt service ratios must a high-ratio loan meet at the time it is approved?
Paragraph 5(1)(h) of the Insurable Housing Loan Regulations caps the GDS at 39% and the TDS at 44% when a high-ratio loan is approved, and CMHC's consumer requirements state the same limits (as of October 2026). Reversing them is a common slip: the TDS limit is the higher one because it adds all other debts to housing costs.
8. An approved lender is underwriting a high-ratio insured loan of $336,000 (premium included) at a 3.19% contract rate with a 25-year amortization. With monthly payments and semi-annual compounding, what monthly payment must be used for the GDS and TDS ratios?
Subsection 5(3) of the Insurable Housing Loan Regulations requires the ratios to use the payment at the greater of the contract rate plus 2% (5.19%) or 5.25%, so 5.25% applies: $2,002.28 a month. $1,990.69 uses 5.19% and misses the floor, $1,623.04 is the contract payment, and $2,405.49 wrongly adds 2% to the floor.
9. An applicant has an excellent credit bureau score but started a new commission-only job last month. According to OSFI Guideline B-20, how should the lender use the score?
OSFI Guideline B-20 (Principle 2) says a credit score should not be solely relied upon, because it measures past behaviour and does not immediately reflect changes in the borrower's financial condition. A new commission-only job is exactly such a change, so income must still be verified and assessed under Principle 3.
10. Gross income is $92,000 a year. At the qualifying rate, principal and interest is $1,780 a month, property taxes $260 and heating $105. The applicant pays $250 on a line of credit and $380 on a car loan, and spends about $900 on groceries and $1,100 on childcare each month. What is the TDS ratio?
Under CMHC's definition, TDS adds payments on all other debt to PITH: ($1,780 + $260 + $105 + $250 + $380) x 12 / $92,000 = 36.20%. Groceries and childcare are living expenses, not debt payments: adding the groceries gives 47.93% and adding the childcare gives 50.54%, while 27.98% is the GDS alone. B-20 treats other living expenses as a separate factor outside the ratios.
11. A borrower's gross income is $110,000 a year. Property taxes will be $4,200 a year and heating $125 a month; there are no condo fees. Under CMHC's GDS limit, what is the highest monthly principal and interest payment (at the qualifying rate) she can carry?
CMHC's GDS limit is 39% (as of October 2026): 39% of $110,000 is $42,900 a year, or $3,575.00 a month for all PITH costs. Deducting taxes of $350 and heating of $125 leaves $3,100.00 for principal and interest. $3,575.00 forgets to deduct taxes and heating, $3,225.00 forgets heating, and $3,558.33 wrongly applies the 44% TDS limit.
12. Before submitting a deal, an associate phones the applicant's employer and confirms her position and salary. Under the Real Estate Act Rules, what must the brokerage do with this verification?
Real Estate Act Rules s. 72(2) requires the brokerage to maintain copies of the supporting documentation for the verification described under s. 72(1) in the brokerage file; s. 72(1) also requires it to disclose in writing to the parties what steps it took to verify the information. Nothing requires filing it with RECA, and destroying it after approval would leave the brokerage unable to show what it verified.
13. Gross income is $120,000 a year. Taxes are $330 and heating $120 a month, with no condo fees. The borrower pays $650 on a car loan and $300 on a line of credit. Applying both of CMHC's debt service limits, what is the highest monthly principal and interest payment that qualifies?
Under CMHC's limits (39% GDS, 44% TDS, as of October 2026), the GDS allows $3,900 for PITH, or $3,450 for P&I after $450 of taxes and heating. The TDS allows $4,400 for PITH plus other debts, or $4,400 - $950 - $450 = $3,000.00 for P&I. The lower amount governs. $3,950.00 forgets the other debts and $2,500.00 wrongly deducts them from the GDS limit.
14. A federally regulated lender's rate sheet shows a five-year fixed rate of 3.94% for insured mortgages and 4.29% for uninsured (conventional) mortgages. Your client is buying with 25% down, so her loan is uninsured. At what rate must she be qualified?
OSFI's minimum qualifying rate, which federally regulated lenders must apply to uninsured mortgages, is the greater of the contract rate plus 2% or 5.25% (page modified January 29, 2026). Her contract rate is the conventional 4.29%, so she qualifies at 6.29%. 5.94% applies the buffer to the insured rate she is not getting, 5.25% is the floor, which governs only below a 3.25% contract rate, and 4.29% skips the stress test entirely.
15. OSFI's minimum qualifying rate for uninsured mortgages is a requirement for which lenders?
OSFI states that it obliges federally regulated lenders to apply the MQR stress test, and Guideline B-20 sets this expectation for uninsured mortgages at federally regulated financial institutions. Private lenders and MICs are not supervised by OSFI, and insured loans have their own qualifying-rate rule in s. 5(3) of the Insurable Housing Loan Regulations.
16. At the qualifying rate, a buyer's principal and interest would be $2,310 a month, with property taxes of $285 and heating of $135. She has no other debts and no condo fees. What minimum gross annual income keeps her within CMHC's GDS limit?
Under CMHC's 39% GDS limit (as of October 2026), PITH of $2,730 a month, or $32,760 a year, requires $32,760 / 0.39 = $84,000.00 of gross income. $74,454.55 divides by the 44% TDS limit instead, $79,846.15 leaves out heating and $75,230.77 leaves out property taxes.
17. A home in the Town of Banff sits on leased land, with a site lease of $1,800 a year. Gross income is $96,000. At the qualifying rate, P&I is $2,240 a month; taxes are $270 and heating $140 a month. Under CMHC's method, what is the GDS ratio?
CMHC's GDS includes PITH plus the annual site lease in the case of leasehold tenure (and 50% of condo fees, which apply only to condos). Monthly: $2,240 + $270 + $140 + $150 = $2,800, and x 12 / $96,000 = 35.00%. Leaving out the lease gives 33.13%, counting only half of it, as if it were a condo fee, gives 34.06%, and leaving out heating gives 33.25%.
18. A lender will approve a young borrower only if her father co-signs, and it relies heavily on his income. According to OSFI Guideline B-20, what should the lender do about the co-signer?
OSFI Guideline B-20 (Principle 3) says that where a lender obtains a guarantee or co-signer, it should carry out a sufficiently rigorous credit assessment of that person, commensurate with the reliance placed on the support, and the co-signer should fully understand the legal obligations. A co-signer is liable on the debt, so deferring the check to collections defeats its purpose.
19. A borrower earning $135,000 a year is approved for a $512,000 uninsured mortgage at a 4.59% contract rate, 25-year amortization (monthly payments, semi-annual compounding). Taxes are $4,080 a year and heating is $130 a month. Using OSFI's minimum qualifying rate, what is the GDS ratio?
OSFI's MQR (as of October 2026) is the greater of 4.59% + 2% = 6.59% or 5.25%, so 6.59% applies. The payment on $512,000 at 6.59% over 25 years is $3,457.48; adding taxes of $340 and heating of $130 and multiplying by 12 gives a GDS of 34.91% on $135,000. Using the contract-rate payment of $2,859.45 understates it at 29.60%, leaving out heating gives 33.76% and leaving out taxes gives 31.89%.
20. A buyer offers $475,000 for a Lethbridge home and will put $95,000 down. What is the loan-to-value ratio, and must a federally regulated lender have the loan insured by law?
The loan is $380,000, so LTV = $380,000 / $475,000 = 80.00%. Under s. 1 of the Insurable Housing Loan Regulations, a low ratio loan is at or below 80% of value, and OSFI Guideline B-20 notes that insurance is required by law only above 80%. 20.00% is the down payment share and 25.00% divides the down payment by the loan.
21. An electrician earns a base salary of $72,000, plus overtime of $14,000 last year and $6,000 the year before. The lender's policy uses the two-year average of overtime. With PITH of $2,350 a month at the qualifying rate, what is the GDS ratio?
OSFI Guideline B-20 (Principle 3) says temporarily high income such as overtime should be normalized or discounted; this policy averages it: ($14,000 + $6,000) / 2 = $10,000, for qualifying income of $82,000. GDS = $2,350 x 12 / $82,000 = 34.39%. Using last year's overtime only gives 32.79%, ignoring overtime gives 39.17%, and adding both years gives 30.65%.
22. A federally regulated lender's own policy allows a GDS of up to 42%, but the deal is a high-ratio loan to be insured with CMHC. Whose debt service limits govern the approval?
OSFI Guideline B-20 (Principle 3) says that for insured residential mortgages, lenders are expected to meet the mortgage insurer's debt serviceability requirements, and s. 5(1)(h) of the Insurable Housing Loan Regulations caps GDS at 39% (as of October 2026). A lender's internal policy can be stricter for its own risk, but it cannot loosen the insurability criteria.
23. A borrower earns $105,000 a year; taxes will be $280 and heating $110 a month, with no other debts. The lender offers an uninsured five-year fixed rate of 4.49%, 25-year amortization, and caps GDS at CMHC's limit. Qualifying at OSFI's MQR (monthly payments, semi-annual compounding), what is the largest mortgage she qualifies for, to the nearest dollar?
Under OSFI's MQR (as of October 2026) she qualifies at 6.49%. CMHC's 39% GDS limit allows $105,000 x 39% / 12 = $3,412.50, less $390 of taxes and heating, so $3,022.50 for P&I. The present value of $3,022.50 a month at 6.49% over 25 years is $451,647. Discounting at the 4.49% contract rate gives $546,646, the classic stress-test error; $517,022 uses the 44% limit and $509,924 forgets to deduct taxes and heating.
24. Part of an applicant's income comes from a consulting contract with a company outside Canada, paid irregularly into a foreign account. How does OSFI Guideline B-20 expect the lender to treat this income?
OSFI Guideline B-20 (Principle 3) states that income from sources outside Canada poses a particular challenge for verification, that lenders should conduct thorough due diligence, and that income that cannot be verified by reliable, well-documented sources should be treated cautiously. B-20 does not ban such income outright, and a self-declaration is not independent verification.
25. A buyer has $72,000 in savings for a CMHC-insured purchase and must keep $10,500 of it for legal fees and other closing costs. What is the highest purchase price the rest of her savings allows under the minimum down payment rules (as of October 2026)?
CMHC requires a minimum down payment of 5% of the first $500,000 and 10% of the portion above $500,000 (as of October 2026), and money set aside for closing costs cannot also serve as down payment: $72,000 - $10,500 = $61,500 is available. The first $500,000 uses $25,000, and the remaining $36,500 covers 10% of a further $365,000, so the price is $865,000. $970,000 forgets the closing costs, $959,500 deducts them from the price instead of from the savings, and $615,000 applies 10% to the whole price.
26. An applicant's gross salary is $78,000 a year and her take-home pay is $4,950 a month. Housing costs at the qualifying rate: principal and interest $1,760, property taxes $255 and heating $130 a month. What is her GDS ratio?
Section 1 of the Insurable Housing Loan Regulations defines GDS as a percentage of the borrower's gross annual income, not take-home pay: $2,145 x 12 / $78,000 = 33.00%. Dividing by net pay ($2,145 / $4,950 = 43.33%) overstates the ratio; 31.00% omits heating and 29.08% omits taxes.
27. Co-borrowers earn $78,000 and $54,000 a year. For a Calgary condo, taxes are $240, heating $75 and condo fees $520 a month; their other debts total $900 a month. The uninsured contract rate is 3.79%, 25-year amortization (monthly payments, semi-annual compounding). Using OSFI's MQR and CMHC's GDS and TDS limits, what is the maximum mortgage, to the nearest dollar?
Under CMHC's limits (39% GDS, 44% TDS) and OSFI's MQR of 5.79% (as of October 2026), combined income is $132,000. The TDS cap allows $4,840 a month, less $900 of debts, $315 of taxes and heating and $260 (50% of the condo fees), leaving $3,365.00 for P&I; the GDS cap would allow $3,715.00, so TDS governs. At 5.79% over 25 years, that payment supports $536,360. Counting the full condo fee gives $494,917, and using the GDS amount gives $592,148.
28. How do the Insurable Housing Loan Regulations define the gross debt service (GDS) ratio?
Section 1 of the Insurable Housing Loan Regulations defines the GDS ratio as the percentage of the borrower's gross annual income required to cover the annual payments associated with the property securing the loan. Adding all other debts describes the TDS ratio, and the share of value borrowed is the loan-to-value ratio.
29. A first-time buyer purchases a $486,000 resale home with the minimum down payment, and her lender adds a quoted 4.00% insurance premium to the loan. The contract rate is 3.94% with a 30-year amortization. With monthly payments and semi-annual compounding, what payment is used for her GDS?
Under s. 5(1.1) and 5(3) of the Insurable Housing Loan Regulations, a first-time buyer may amortize over 30 years and the ratios use the greater of 3.94% + 2% or 5.25%, i.e., 5.94%. The 5% down payment is $24,300, so the loan is $461,700 and the quoted 4.00% premium is $18,468, for $480,168: $2,838.17 a month. Leaving out the premium gives $2,729.01, using 25 years gives $3,055.04, and the 3.94% contract rate gives $2,267.01.
30. An underwriter at a federally regulated lender asks for the utility bills behind the heating cost on an application. Why does OSFI Guideline B-20 support this request?
OSFI Guideline B-20 (Principle 2) lists the loan documentation lenders should keep, including debt service ratio calculations with verification documentation for key inputs (e.g., heating, taxes and other debt obligations). B-20 sets no national heating figure, and heating is a listed GDS factor that cannot simply be dropped.
31. A buyer pays $480,000 for a home that appraises at $495,000 and takes a $456,000 insured loan, before the premium. What loan-to-value ratio applies under the Insurable Housing Loan Regulations?
Section 1 of the Regulations caps the value of a property being purchased at its purchase price (plus planned improvements, if financed), so the higher appraisal cannot be used: $456,000 / $480,000 = 95.00%. Using the appraisal gives 92.12%, averaging price and appraisal gives 93.54%, and adding a 4% premium gives 98.80%, but s. 1(3) excludes premiums from the principal amount.
32. A homeowner's property is valued at $520,000 and carries a $360,000 first mortgage. She applies for a $70,000 second mortgage. What is the combined LTV, and how do the Insurable Housing Loan Regulations classify the new loan?
Under s. 1 of the Insurable Housing Loan Regulations, a loan is high ratio when its principal plus the balance of any loan with an equal or prior claim exceeds 80% of value: ($360,000 + $70,000) / $520,000 = 82.69%. 69.23% looks only at the first mortgage and 13.46% only at the new second; the test counts prior charges.
33. Income is $96,000 a year. Proposed uninsured loan: $430,000 at 4.09%, 25-year amortization (monthly payments, semi-annual compounding). Taxes are $300, heating $115 and a car loan $420 a month. Using OSFI's MQR, what are the GDS and TDS, and do they fit within CMHC's limits?
OSFI's MQR (as of October 2026) is 6.09%, so the qualifying payment is $2,774.21. GDS = ($2,774.21 + $415) x 12 / $96,000 = 39.87%, and adding the $420 car loan gives a TDS of 45.12%, above CMHC's 39%/44% limits. At the contract rate the file looks fine (33.72%/38.97%), and at the 5.25% floor it also passes (37.22%/42.47%); leaving out heating gives 38.43%/43.68%, which is exactly what the stress test is meant to catch.
34. An applicant's employment letter states a salary of $85,000, but her recent pay stubs annualize to $68,000. Under OSFI Guideline B-20's income verification criteria, what is the main problem with this file?
OSFI Guideline B-20 (Principle 3) asks lenders to confirm that income is verified by an independent source that is difficult to falsify, directly addresses the declared amount, and does not contradict other information provided by the borrower. Here the documents conflict, so the income is not verified until the gap is explained; B-20 does not let the higher figure govern.
35. A first-time buyer with an insured high-ratio loan can afford principal and interest of $2,600 a month at her 6.14% qualifying rate (monthly payments, semi-annual compounding). How much more can she borrow with a 30-year amortization instead of 25 years, to the nearest dollar?
Subsection 5(1.1) of the Insurable Housing Loan Regulations allows up to 30 years when a borrower is a first-time home buyer. At 6.14%, $2,600 a month supports $430,748.45 over 30 years and $401,140.53 over 25 years, a difference of $29,607.92, or $29,608. Discounting at the 4.14% contract rate gives $50,553, compounding monthly gives $28,992, and $156,000 simply adds 60 payments without discounting.
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