This is the 2nd step to buying a home.
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.
Cost of buying a home:
One time costs
- Down payment
- Legal fees
- Inspection fees
- Property taxes
Everybody's total costs are different, but chances are good you won't have that much money saved up (most people don't). Hopefully, you have enough for a nice down payment, but for the rest...
Do you need a mortgage?
Let's determine how much the bank will lend you. The first step is to understand how much you can afford each month. This is determined by using two lending principles:
- Gross Debt Service Ratio (GDSR) Calculation: This lending principle simply states that your monthly housing cost should not exceed 32% of your gross monthly family income.
- Total Debt Service Ratio (TDSR) Calculation: This lending principle summarizes 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.