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Home Ownership

How to Know What Kind of Home You Can Afford

Clock5 min. read
byVexxit Staff onJune 28, 2020

The first thing you should think about when planning to buy a home is what you can afford. Here's a guide on understanding the kind of home you can afford based on your finances.

How do you know when you’re ready to buy a home? When you start “window shopping” for them.

You know what I’m talking about. You notice “for sale” signs as you’re driving around the neighbourhood. You pick up a copy of “Real Estate News” while waiting in line at the coffee shop. You may have even logged on to MLS to get a sense of how much homes in your area cost, and whether you can even afford one.

The good news is: you probably can. But there are several things to consider before jumping into the real estate market. This will be, after all, the largest financial transaction of your life.

Your first move should be to get pre-approved for a mortgage to determine your price range. Talk to your bank for a start, or a financial advisor/mortgage broker. As long as you have stable employment, a decent credit rating and some savings socked away for your down payment, getting approved shouldn’t be a problem. Ideally, you’ll have at least enough money saved up for a 10 percent down payment. I know the minimum required for first time home buyers is 5 percent, but you’ll be a lot better off in the long run if you can put down 10, or even 20 per cent.

Once you’ve been pre-approved and know how much you can afford to spend, make a list of everything you could possibly want in your new home. How many bedrooms and bathrooms? Square footage? Finished or unfinished basement? Yard size? Neighbourhood? This are all important aspects to consider. Basically, you’re figuring out what your dream home will be (within your price range, of course!)

Now, it’s time to start looking in earnest. Find a real estate agent you like, and set your MLS search parameters so you get that daily morning email showing you all the new listings in your price range. Go out and view homes. Get a sense of what to look for with respect to maintenance and repairs. Switch up real estate agents if the one you have isn’t doing a good enough job. You are in control here. It’s a buyer’s market and there is no reason for you to compromise your vision of a perfect first home.

Ok, there is one reason. That home may not exist in reality. But, you can get damn close. All it takes is patience. Do not rush into this decision. Look at lots of different houses, take the time to figure out what you want. This is a purchase that you will be paying for over the next 25 years or so. It’s okay to take a year or more to find your first house. And when you do, you’ll know.

Get Help Buying A House

Using a financial advisor and lawyer as resources in your home buying process can ensure things go as smoothly as possible.

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