Buy­ing a home: Are you fi­nan­cially ready?

The Telegram (St. John’s) - Home Buyers' Guide - - METRO REGION -

If youʼre like most Cana­di­ans, your home is prob­a­bly the most im­por­tant in­vest­ment you will ever make. But how do you know if you are fi­nan­cially ready for all the re­spon­si­bil­i­ties that come with home­own­er­ship? To help you avoid any un­pleas­ant sur­prises, Canada Mort­gage and Hous­ing Cor­po­ra­tion (CMHC) of­fers the fol­low­ing tips on how to as­sess your cur­rent fi­nan­cial sit­u­a­tion, cal­cu­late your monthly ex­penses and de­ter­mine how much home you can af­ford: First, cal­cu­late your net worth. Your net worth is the to­tal of all of your as­sets (in­clud­ing any in­vest­ments, sav­ings, prop­er­ties, ve­hi­cles and other as­sets you own) mi­nus your li­a­bil­i­ties (such as any mort­gages, car loans, per­sonal or stu­dent loans, credit cards or other debts). Your net worth will give you an ac­cu­rate snap­shot of your cur­rent fi­nan­cial sit­u­a­tion, as well as an idea of how large a down pay­ment you can af­ford. Next, cal­cu­late your cur­rent monthly ex­penses to de­ter­mine what kind of mort­gage pay­ment could com­fort­ably fit into your bud­get. Once you have a clear pic­ture of your fi­nan­cial sit­u­a­tion, fig­ure out how much you can af­ford in monthly hous­ing costs. As a gen­eral rule, your to­tal monthly hous­ing costs (in­clud­ing mort­gage prin­ci­pal and in­ter­est, taxes and heat­ing) should­nʼt ex­ceed 32 per cent of your gross house­hold monthly in­come. In ad­di­tion, your en­tire monthly debt load (in­clud­ing mort­gage pay­ments, car or stu­dent loans, and credit cards) should­nʼt be more than 40 per cent of your gross house­hold monthly in­come.If you have made all the nec­es­sary cal­cu­la­tions and feel you are ready, it can be a good idea to se­lect a len­der and ask them to pre-ap­prove you for a mort­gage. Get­ting preap­proved lets you know in ad­vance what price range you should have in mind­when you are shop­ping for your new home.

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