A borrower applies for a conventional mortgage with a 20% down payment on a $600,000 home. Their mortgage payment is calculated to be $2,500/month based on the contract interest rate. What additional factor will the lender consider to determine their affordability?

Question: A borrower applies for a conventional mortgage with a 20% down payment on a $600,000 home. Their mortgage payment is calculated to be $2,500/month based on the contract interest rate. What additional factor will the lender consider to determine their affordability?

Answer options:

• Their credit score only determines the interest rate, not the stress test. ✅ The mortgage stress test will evaluate their ability to make payments at a higher qualifying interest rate.
• Only the borrower's gross income is relevant for a conventional mortgage application.
• The lender will only verify that the down payment came from a legal source.

Correct answer: The mortgage stress test will evaluate their ability to make payments at a higher qualifying interest rate.

Explanation: The mortgage stress test requires lenders to evaluate a borrower's ability to afford their mortgage payments at either the contract rate plus 2% or a benchmark rate set by the Bank of Canada, whichever is higher, even for conventional mortgages.