Case Study "Qualifying for a mortgage" Mortgage lenders must determine whether a mortgage loan is adequately secured by the property, and whether the borrower has the financial capacity to make the mortgage payments. To do this, they calculate and set upper limits on three ratios( the indicated upper limits are typical for what are called "conventional first mortgages") Loan - to -Value ratio=(principal amount of the loan)/(Lending value of the property) *100%%75% The 75% maximum for this ratio means the borrower's minimum down payment is 25% of the "lending value". The lending value is the lesser of the purchase price and the market value as determined by a certified appraiser. CMHC normally restricts debt service ratios to 35% (GDS) and 42% (TDS). Gross Debt Service Ratio (GDS)=(Total monthly payments for mortgage, property taxes and heat)/(Gross monthly income)*100%