Before you start looking for your dream home, let’s find out how big you can dream. Knowing your true budget is the first and most important step in buying a home. Why?
A home is a big purchase.
It’s probably the most expensive thing you’ll ever buy, and there are lots of expenses you might not even
know about. Everybody’s total costs are different, but it’s almost guaranteed you won’t have that much money saved up.
Hopefully you have enough for a nice down payment, but for the rest...
Yes, you need a mortgage,
we just need to figure out how much a bank will lend you.
How much a bank will lend you?
The first step in determining how much a bank will lend you is to understand how much you can afford each month. This is determined using two lending principals. The first lending principle is that your monthly housing cost should not exceed 32% of your gross monthly family income. This principle is known as the Gross Debt Service (GDS) ratio calculation. The second lending principle used, the Total Debt Service (TDS) ratio calculation, is that your monthly housing cost and payments on all of your other debts (including loans, credit card and lease payments) should not exceed 40% of your gross monthly income. Our Income Calculator will help you easily estimate your maximum affordable mortgage payment of principal and interest. All you need to do is enter your monthly income and expense amounts and the calculator will do the rest. Once you have used the Income Calculator to
estimate your maximum monthly total; you can compare this number to the mortgage payments for specific loan amounts. Simply enter your information into our Mortgage Calculator and your payments will be figured out for you.
(CREA)