Why is it so important to know how much you can afford to
spend on a home?
Two reasons.
First, you don't want to buy a property and then find out,
only after you’ve moved in, that you can't financially maintain it. That would
mean having to resell it under stressful conditions.
Second, you don't want to settle for a property that's less
than ideal, when you really could have afforded the "dream home"
you've always wanted.
So how do you figure out how much you can afford to pay for
your next home?
The first step is to talk to a good REALTOR®. He or she will
help you gain a clearer understanding of how much your current home will likely
sell for in today's market. That amount, together with other financial
resources you might have (such as savings), will determine your down payment.
The next thing you’ll need to figure out is your mortgage.
Your REALTOR® can help you find a lender who will take a variety of factors
into account – income, credit rating, debts, expected down payment, etc. – to
calculate the maximum amount of mortgage for which you qualify.
Say, through the proceeds of the sale of your home combined
with your savings, your expected down payment is $90,000. If the lender
authorizes a mortgage of $270,000, then you can afford a $360,000 home.
Of course, that doesn't mean you'll need to spend that much.
In fact, a home that meets your needs in terms of property type, features, and
neighbourhood, may in fact cost you less.
One thing is for sure. A good REALTOR® can work with
whatever amount you can afford and show you homes on the market that most
closely meet your needs.
Looking for a good REALTOR®? Call me today.
