Are you financially ready to buy a home?

Are you financially ready to buy a home?

 

For most people, buying a home is biggest financial decision they will ever make. There are many different levels of readiness, but one of the most important levels is if you are financial ready to take on home ownership. Right now you may be doing well, have a cushion, but there are factors to consider before jumping in and visiting those open houses.

 

The first thing you need to figure out is how much you are currently spending.

To do this, you’ll need to look at two things:

 

·        What are your monthly household expenses?

ü  Rent, insurance, heating and other fixed expenses

ü  TV, Medical, groceries and other variable expenses

ü  Try to include everything you can think of that you spend money on

 

·        What are paying down on your debt every month?

ü  Loans for cars or leases

ü  Credit cards

ü  Personal loans or lines of credit

ü  Student loans

ü  Any property loans

ü  Other loans (business, family, etc.)

 

These two pieces of information are vital to figure out if you can take on any more debt as you purchase your home. Also, this is the information a mortgage broker or lender will ask you for to find out if you qualify for a mortgage.

 

Now that you have that information ready and in front of you, there are two affordability rules to help you clarify your position.

 

1.      Your monthly housing cost should not be more than 32% of your gross monthly income.

2.      The entirety of your monthly debt load should not be more than 40% of your gross month income.

 

If you aren’t sure if your numbers work or you’d like some help, visit cmhc.ca (http://www.cmhc.ca/en/co/buho/hostst/hostst_002.cfm) to see spreadsheets and a calculator to help you work it out.

 

On top of these two affordability rules, you will need to have a down payment saved up and be able to work with the interest of the mortgage loan.

Agent Login    |    Powered by Onjax
Create Free Account or
Choose Your Agent (optional)
By using our site, users agree
to the terms and privacy policy
Equal Housing Opportunity Realtor MLS
Sign-In or