How Much Can You Afford

Everyone dreams of one day being able to buy that dream home. Whether it is that oceanfront property for sale that you saw while on vacation or a ranch style home out in the country, we each have a mental picture of the piece of real estate that is perfect for us.

Unfortunately, cost often gets in the way of our ability to turn our property dreams into reality. We all need to make a realistic picture of what we can afford in terms of the total cost of a home and in mortgage payments before we begin shopping around. That's what we are going to take a look at in this article.

First of all, let's talk about the cost of the home itself. Today, many people getting into the market for the first time may feel hopeless about being able to afford any home at all. Houses that were selling for under $100,000 less than a decade ago are now being sold at triple that price, after the biggest real estate pricing jump in history. Whether we are talking Leslieville real estate or homes in downtown Toronto, home prices are higher than ever.

Fortunately, many lenders have tailored their policies with this new reality in mind. We're not just talking about waiving down payment requirements, sub-prime lending, or other recipes for disaster, either. Most lenders are now offering mortgage terms that run much longer than the historical average. While it means you will be paying your house off for longer, it also means that you can make much smaller monthly payments on a Mississauga condo than they would be on a shorter term loan.

That still means you have to come up with an idea about what you can reasonably afford; this of course will be determined by your monthly wages. At this point, make your current job the basis of your calculations. You may dream of getting out of the factory where you manufacture suction diffusers and moving on to graduate from law school, but until you have a job as a lawyer, you need to use only your current pay to determine what kind of mortgage payments you can afford.

Next, take a look at what kind of home you want. Having a base price on a piece of Whitby real estate will give you something to go on as you make the rest of your calculations. Remember to assume a down payment of 15-20% when you are determining the actual mortgage you will carry. After subtracting the down payment from the asking price, you have an idea of what your total mortgage will be.

Now, figure out what your mortgage payments will look like each month. There are plenty of different programs online to help you calculate a mortgage, and they will include the interest rate you need to look for when actually applying for the mortgage itself.

When you are looking at owning a home, remember that there will be more to the cost than the price tag alone. You will have to consider the price per month that you will need to dedicate to property taxes, utilities, insurance, and maintenance. These are generally based on the cost of the house, so add them by month to the total payments you have calculated.

Once you have that monthly figure, you will know how much you can afford by comparing it to a percentage of your monthly income. Common wisdom states that total house payments will be equal to 40% of one`s income. Therefore, if all the factors mentioned above equal or are less than that 40%, you are looking at what you can afford as far as a mortgage. You now know exactly what kind of home you can feasibly buy.





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Monday, December 11, 2017