how much can i afford?

Very few of us have the cash on hand just to walk in and write a cheque for a house.  Chances are, you will probably need to arrange financing in the form of a mortgage.

In the past, people thought that arranging your home financing could wait until after they made an offer on a house and it had been accepted.  Today, there’s a growing trend towards approaching the financing process the other way around – securing a pre-approved mortgage before you start shopping for a house.

The Benefits of a Pre-approved Mortgage

When you have a pre-approved mortgage, it means a lender has made an actual commitment (subject to conditions) to loan you money.  So you know exactly how much you can afford before you go house hunting.  But that’s just one of many benefits of being pre-approved:

  • Your mortgage rate, depending on your financial institution, will be locked in against increases for 90 days if you select a fixed-rate (and it can go lower if rates go down).
  • Real estate agents will take you seriously because they’ll know you’re committed to purchasing a home.
  • You can save time by avoiding houses you know are outside your price range.
  • When you make an offer to purchase, you can tell the seller is more likely to give it serious consideration because you have solid financial backing.
  • Your pre-approved status may give you more negotiating power with a seller.
  • You will be able to better manage your money; knowing your monthly payment amounts, as well as how much your down payment will be.

In short, when you’re ready to start looking for a home to buy, securing a pre-approved mortgage should be step one. 

Start with a Financial Snapshot

Another advantage of applying for a pre-approved mortgage is that it gives you a reason to take a closer look at your overall financial picture, including:

  • How much of a down payment you want to make
  • Your household income
  • Your current debts / liabilities, your monthly payments associated with those debts and your estimated monthly housing-related costs
  • The acceptable Gross Debt Service (GDS) and Total Debt Service (TDS) ratios for your mortgage financing
  • Your current spending practices

For instance, you may have two incomes at the moment, but if you’re planning on starting (or growing) a family down the road, you could be looking at just one income in future. 

Talk to a Professional

Next, you will want to speak with a professional mortgage specialist.  Your mortgage specialist can tell you about the various mortgage options available to you (fixed vs. variable rate, interest terms, payment options, amortization, etc.) and help you decide which of them best suit your needs. 

From there, he or she can help you complete an application, which will require your financial details and give the lender permission to obtain a credit bureau report.

Finally, the specialist will advise you on which documentation – income confirmation, down payment confirmation, etc. – you will need to supply upon conditional approval of your mortgage.  For a full list, visit:

Angela Slager

Angela Slager

CENTURY 21 Heritage House Ltd., Brokerage*
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