A lot of people are getting stressed out by Canada’s new mortgage stress test. In the past, if you had a good sized down payment (ie 20%) someone with a low income could purchase a home even if they did not meet the debt level guidelines for insured mortgages of 32/40 . Later this was changed to 35/44 which made life even easier but – no more.

What is a person with a low income, good credit and a good down payment supposed to do now?

Here’s a solution – get a roommate. If you purchase a home with a friend who is going to share the other bedroom of your condo or take over the basement, the rules do not allow you to include the rent. But there are plenty of homes out in the market with a legal basement suite, a duplex or perhaps a granny suite over the garage. As long as the income portion of your property is zoned for a rental portion, you can claim a portion of the rent as income and qualify for more house.

There are certain minimum guidelines for lenders – they usually want a separate entrance, kitchen and washroom. They may ask for a separate hot water tank as well. Lenders will credit 50% -85% of the rent towards your annual income.

Courtesy of David Cooke – AMP – DLC Clarity Mortgages in Calgary, AB.