If you’re in the market for a new home, take a moment to ask yourself a few key questions about what you should be looking for, how much you can comfortably afford to spend, and whether homeownership is right for you.

How much home can you afford?

• Before you begin shopping for a home, prepare a simple budget, so you can figure out where most of your money is going on a monthly basis. If you aren’t sure how much you’re spending each month, use CMHC’s Household Budget Calculator to take a realistic look at your current expenses.
• When preparing your budget, don’t forget that there are many up-front costs that come with buying a home. This can include a deposit, appraisal fees, legal fees, home inspection fee, survey or certificate of location cost, title insurance, land registration fees, water or septic tests, Estoppel Certificate fees, condo or strata fees, property taxes, utility bills, property insurance, moving costs and other expenses. Use CMHC’s Home Purchase Cost Estimate Worksheet to calculate your up-front costs.
• Always keep in mind how much you can afford to spend. As a general rule, your total monthly housing costs (including mortgage payments, property taxes and heating expenses) should be no more than 32% of your gross household monthly income.
• In addition, your total monthly debt load (meaning your housing costs plus any car loans, credit card payments, personal loans, line of credit payments or other debts) shouldn’t exceed 40% of your monthly income.
• The amount of house you can afford will also depend on the size of your down payment. Once you’ve decided how large a down payment you’re prepared to make, use CMHC’s Mortgage Affordability Calculator to figure out the maximum home price you can afford, how large a mortgage you can borrow, and what your monthly payments will be.
• If your down payment is less than 20% of the value of the home you want to buy, you will also need to budget for Mortgage Loan Insurance. Mortgage loan insurance helps Canadians buy a home with a minimum of 5% down. Talk to your broker or lender to find out more.
• After all these calculations, if the numbers don’t look encouraging, you may want to pay off some other loans, save for a larger down payment, lower your target home price, or take a look at your budget to see where you can spend less.

Rob Longo, Sales Representative    ABR, GREEN, RSPS    Magic Realty Inc.    805 N. Christina Street    Sarnia, Ontario    www.roblongo.ca    www.magicrealty.com