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 Angelas 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 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? (8 marks)

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

3. Explain to Robert and Angela, what creditors look for when they apply for a mortgage? (5 marks)

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