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Preparing to Buy

Now that you’ve decided that home ownership is right for you,
you will need to determine if you are financially ready. At this
point it’s a good idea to take a look at your entire financial
picture. You should be prepared and fully informed not just about
the initial purchase but about your financial responsibilities
in the future.

Scroll down to read more about being financially ready to buy.

Prev: Deciding to Buy

Next: Choosing a REALTOR®


 

Get a Financial Overview

There is a financial exercise you can do to see where you stand:

  • Determine your current monthly Expenses.
  • Determine your current monthly debt payments.
  • Calculate your Net Worth – The amount left over after subtracting your total liabilities from your total assets.

How Much Can You Afford?

There are two general affordability rules that will help you figure out what you can afford on a monthly basis in your current financial situation:

  • Your monthly housing costs shouldn’t be more than 32% of your gross household monthly income. Monthly housing costs include: mortgage principal and interest, taxes and heating expenses.
    Known as your Gross Debt Service (GDS) ratio.
  • Your entire monthly debt load shouldn’t be more than 40% of your gross monthly income. This includes: housing costs and other debts such as car loans and credit payments.
    Known as your Total Debt Service (TDS) ratio.

These numbers help you to determine your overall financial health. They’re also part of what your lender will consider when determining how much you can be approved for.

Check Your Credit Rating

Your credit score will have a huge impact on what type of property you can buy, and at what price. It is first recommended to check your credit rating either on your own or with an experienced lending institution so that you can determine what you can afford. The lender will research your credit ratings from the two credit reporting agencies Equifax and Trans Union or you can go to them directly online. We will be happy to recommend experienced, knowledgeable lenders in the residential, construction, and commercial and investment real estate fields.

Get a Mortgage Pre-Approval

Having a pre-approved mortgage amount makes the search for your new home much easier and less time consuming because you have a good price range in mind. There a few pieces of information you will need to have handy the first time you meet with a lender:
  • Your personal information including identification such as your drivers license.
  • Details on your job, including confirmation of salary in the form of a letter from your employer.
  • Your sources of income.
  • Information and details on all bank accounts, loans and other debts.
  • Proof of financial assets.
  • Source and amount of down payment and deposit.
  • Proof of source of funds for the closing costs.