How Much House Can You Really Afford?
Monday Apr 09th, 2018
If you are ready to put your renting days behind you or perhaps it’s time to fly the family nest, getting pre-approved for a mortgage might seem like a logical first step. And it is – but, it also comes with an additional consideration that excited first-time buyers can forget: knowing just how much they can afford.
Now, you may think, “I know how much I can afford because my mortgage advisor pre-approved me for $325,000.” And that is correct, somewhat. During the pre-approval process, your lender will assess your income, debt, credit score, and other factors to determine how much they can loan you, but that doesn’t mean that you can afford the monthly payments.
Before you get approved for a mortgage, you need to sit down and crunch your numbers, which will help you create a home budget that is realistic and reflective of your current situation. If you have student loans, a pricey car payment, childcare expenses or other financial commitments, this will impact how much you can afford each month for your mortgage payment. And, don’t forget – home ownership comes with additional costs that you may not have to carry while renting or living at home. There are utility bills, property taxes, ongoing maintenance and repairs, insurance premiums, and perhaps HOA or condo fees. If you’ll be living farther away from work, school, or family, you’ll have increased commuting costs as well.
It’s also important to put together your own budget because only you know your daily spending habits and financial goals. Crunching your numbers will also help you identify what you may be willing to sacrifice to afford a mortgage, like fewer vacations, less dining out, or driving an older vehicle. On the other hand, this exercise might show you that you aren’t ready for homeownership and the sacrifices that come with it. And you know what? That’s okay too. It’s better to realize this now before getting locked into a mortgage payment that can cause additional stress and financial hardship.
To learn more about getting pre-approved for a mortgage or the typical expenses homeowners face, it’s best to contact a real estate sales representative, like myself, who has established relationships with many trusted lenders in Mississauga and the Greater Toronto Area. These are professionals that I trust to give my clients the best advice and guidance, so they can feel confident come offer time. After all, a little peace of mind goes a long way when purchasing your life’s largest investment. Let’s connect to make your home buying dreams a reality.