Affording a home
Buying
a home is exciting, but it’s also a major financial commitment. If you are thinking of buying a home in the near future, the Ontario Real
Estate Association and your local Realtor offer the following advice to
help ensure you get a home you can afford.
What
a home costs
When
you are determining the cost to buy a home, you’ll need to consider the
initial purchase price which includes your down payment as well as all the
one-time costs like a home inspection, lawyers’ fees, moving costs and
HST on new homes.
Most homebuyers take on a mortgage loan from a bank or other financial institution when buying a home. When lenders determine how much money they will lend you, they look at your ability to pay all of the costs associated with buying a home. Before you go shopping for a lender, you can predetermine what you can afford by using the same formulas the financial institutions use.
Reputable lenders will not permit a borrower to take on a debt load they can’t carry and most insist that your monthly housing expenses should not exceed 30 per cent of your monthly gross family income. This is called your Gross Debt Service Ratio (GDS), which includes your mortgage and other costs such as property taxes, heating, insurance, and condo fees.
It’s also a good idea to check your credit rating in advance. You can visit the web sites of Equifax Canada, Trans Union Canada or Northern Credit Bureaus Inc, to obtain your credit history. This will give you an opportunity to correct any problems with your credit rating before you meet with lenders.
For
help figuring out what you can realistically afford to pay for a home,
enlist the services of a Realtor. A
Realtor can help you understand property financing, taxes, insurance and
the steps you will have to take as a buyer to complete a real estate
transaction. To
learn more about buying a home, visit www.howrealtorshelp.ca
or contact the Ontario Real Estate Association (OREA) at 1-800-563-HOME
for a free copy of the booklet How to Buy your Home.
