What are your housing needs?

How much you can afford!

Three (3) factors to consider before shopping for your new home:
Stage of Life, What you can afford AND Whether you should buy or rent. When looking for a home, consider how many people it must accommodate and what they like to do. Families with children, pets and hobbies have housing needs differing from a retired or professional couple. It is necessary to generalize and draw conclusions about what you need now and what you will probably need tomorrow.

Under 35, people have changing needs. Income earners often switch careers and sometimes move cities. Singles tend to move around. Most people buy their first home.

Between 35 and 50, people become more stable. Income earners generally are more secure in their careers and their family size remain stable. These people tend to stay put.

Over 50, people seem even more stable. Income earners rarely change career and their children leave home. These people do not need the space they now have, yet seem reluctant to give it up. Some want to change to less home maintenance or to acquire more of a retirement lifestyle and travel.

You need to assess whether or not your space is adequate and your needs are met or whether you want to change. If you do decide to change, knowing first what you can afford will help save you time and perhaps disappointment.

Aim at consuming 30% of your gross monthly income for housing (including heat, property taxes and, if such is the case, 50% of the monthly condominium fee). This is Gross Debt Service Ratio (GDS)

Determine Your GDS

What is your price range?

Downpayment

Minimum of 5% downpayment is required for a regular high-ratio insured mortgages. A regular high-ratio insured mortgage is any loan exceeding 75% of the purchase price or the value of the house. By comparison, a conventional mortgage loan is any loan not exceeding 75% of the purchase price or value of the house. If you pay 25% downpayment, you may qualify for a conventional mortgage. If you are required for an insured mortgage, the following table illustrates the Mortgage Insurance Premium that is added to your total mortgage amount and paid immediately upon disbursal of mortgage proceeds by your lawyer handling the transaction. As you can see, the more your downpayment, the lesser the premium.

It is a good idea to add 2% of the purchase price of the home on to your required funds for possible additional closing costs that can be incurred when purchasing, such as legal fees, fire insurance, tax adjustments, interest adjustments, appraisal fees, mortgage application fees, etc. Another consideration before making a final offer to purchase is your monthly household expenses. Complete the expense worksheet below to determine whether this will impact the maximum affordable house price you are considering. I got this expense worksheet from A Step-by-Step Guide to BUYING YOUR HOME from CMHC.