How Much Can You Afford?
Posted by Becky on 10 Mar 2008 | Tagged as: Trish Belford, mortgage, real estate, tips
The size of your down payment affects the amount of your monthly mortgage payments. A smaller down payment will mean your monthly mortgage payments will be higher, but it may allow you to buy sooner rather than later.
A down payment of 20 per cent or more will qualify you for a conventional mortgage. If it is less than 20 per cent, the mortgage must be insured with a mortgage insurance company.
Mortgage payments for principal, interest and taxes generally should not exceed 30 per cent of your gross monthly income. Simply multiply your gross monthly income by 0.30 to determine your maximum monthly payments. If your gross monthly income is $4,000, the most you can afford is $4,000 x 0.30 = $1,200.00.
Don’t forget closing costs such as land transfer tax, legal fees, building inspection, home insurance and realtor fees.
When budgeting, also consider other monthly-related expenses such as condominium fees, heat, hydro, water, property tax, insurance and household maintenance.
And one last tip – get a pre-approved mortgage. This free service from lenders comes with no obligations, helps to confirm your financial boundaries, and frees you to focus on finding the home you want.
Source: Key Partners Press, January 2008.
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