Robert and Angela are newlyweds, and they are considering buying their first home now that the wedding is behind them, and they are settled into their careers. Robert is a teacher and Angela works in marketing. They are currently living with Angela’s parents and are looking at buying a townhouse close to the school where Robert teaches. Angela works from home, but she will have to travel to the office a couple of days a week.

They are meeting with their financial advisor at the bank to get an idea of what they can afford to spend on a home. They have been working hard to save towards their down payment. They have $90,000 from savings and wedding gifts and it is equally split between each of their Tax-Free Savings Accounts.

They have provided you with the following information about their current financial situation:

1. The current 5-year fixed mortgage rate is 4.1%. If the current Bank of Canada 5-year rate is 5.25%, how much would they qualify for now assuming they must pass the stress test? 

2. If they spend the maximum, will they need a high-ratio mortgage (GE or CMHC insurance)? 

3. Explain to Robert and Angela, what creditors look for when they apply for a mortgage?
 

Income: Robert's Income Angela's Income Assets: Chequing Account Savings - TFSA's (Robert and Angela) Car Emergency Fund - TFSA Liabilities: Student Loan Balance Credit Card Balance Current Monthly Expenses: Food Gas and Car Maintenance Minimum Credit Card payment Student Loan Payment Entertainment Estimated Monthly Future Expenses: Property Tax Heating Amount $65,000 $74,000 $3,000 $90,000 $15,000 $10,000 $9,000 $3,000 $450 $500 $90 $270 $500 $325 $200