KNOW WHAT YOU CAN AFFORD IN ADVANCE
You can save valuable time and energy when searching for a
home by knowing what you can afford well in advance.
Generally, the rule of thumb when purchasing a home is to
ensure that your monthly housing costs do not exceed 35% of your gross monthly income.
The most important considerations
when buying a home are your gross household income, your credit rating, your down payment and the current mortgage interest
If you have less than 20% down payment, you will be charged Mortgage Insurance Premium (see details at CMHC
or Genworth link).
To determine the price of the home you will be able to purchase, there is a relatively simple
formula to follow. Calculate your down payment and multiply it by five. For instance, if your down payment on a property is
$40,000, you may be able to purchase a home priced at $200,000. Of couse there are a number of other factors involved
as well, such as your debt load, credit score, etc. This is why it is very important that you talk to a mortgage broker, or
mortgage specialist at your bank or credit union before you start looking!
After you have determined what you can afford, remember that your total monthly debt
and monthly mortgage payment cannot exceed 42% of your gross monthly income. This includes mortgage payments, taxes, heating
expenses, car payments, personal loans, and credit card debts.