Buying your new Home? Are Your Finances in Order?


When you are ready to purchase a home, the most important thing that you can do is have your finances in order before you begin. Having your finances in order will provide you with many advantages when you begin to search for your new home.

¢ Knowing What You Owe. Many people do not gauge their debts on what they actually owe, but rather determine their debt burden by their monthly payments. The truth is, when you do not know what you actually owe, you cannot effectively control your debt. Most mortgage lenders will not provide a low interest mortgage to anyone whose income-to-debt ratio exceeds 32 percent (in Canada) of their income.

When you know what you actually owe, you can determine if you will qualify for a good interest rate on a mortgage. If there are concerns about your debt level, you can take the time to correct this problem by paying down your debts.

¢ Know What You Can Afford. Have you looked at your finances in a manner that will allow you to really understand what you can afford as a mortgage payment? Your mortgage should not exceed 30 percent of your income. In many ways, you should aim for 25 percent or less. Keeping your mortgage payments low will allow you to easily keep up on the payments.
Carefully evaluate what you spend your money on each month. Look for ways to save and reduce spending. Take into account that food and utilities will rise over time. Once you determine your cost of living, you can determine the amount you have for a mortgage.

¢ Save For A Large Down Payment. While there are programs in place that will allow you to place a small down payment on your home, you can secure a lower-interest mortgage by placing a larger down payment on the home. Lenders are more willing to work with someone that is willing to invest into the purchase of a home. This will also help you establish instant equity in the home.

¢ Prequalify For A Mortgage. Before you begin your search for a new home, you should take the time to prequalify for a loan with a lender. This will give you an advantage when looking for a home.

o When you prequalify for a mortgage, you know exactly what you can spend on a home. This will reduce a lot of time spent looking at homes that will not qualify for a loan.
o When you place a bid on a home, you will be taken more seriously by the seller because they know you can actually make the purchase.
o Prequalifying gives you an advantage over other buyers who may be interested in the same house as you.
o You can lock into lower interest rates. Interest rates change regularly. By prequalifying and locking into a rate, your purchase will not be affected by the market.

¢ Have A Rainy Day Fund. It is always important, even if you are not purchasing a home, to have money saved for emergencies. Having a savings account will also increase your chances of securing a lower interest mortgage. Banks and other lending institutions look very favorably on people that have money set aside for a rainy day.

Daniella Aitken

Daniella Aitken

Sales Representative
CENTURY 21 Miller Real Estate Ltd., Brokerage*
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