Before you start your home search; browsing the internet and visiting open houses you need to be financially prepared. The last thing you want is disappointment; identifying your dream home and then realizing that you can’t afford it, this happens way too often. To prevent this from happening to you, read on to find out how to develop a budget and save up so that you can buy that perfect home.
The first thing you need to do is set up an appointment with a lender in order to get an idea if you can be approved for a loan. This will depend upon your job, income, assets, credit profile, and debt-to-income ratio. The debt-to-income ratio (based on the minimum monthly payment that you are paying for your credit cards, student loans, car loans, and personal loans) is critical but ironically the lender will always allow you to borrow more than you may be comfortable borrowing. After all you will have to pay this loan off, and prior to accepting the lender’s offer think about other financial goals in life such as vacations, child education fund, and retirement. The lender will not consider your future plans prior to offering you a loan. If your debt-to-income ratio is higher than 43% and in some cases even higher than 41% then you will not qualify for a loan, if you do end up scoring a lower debt-to-income ratio then you will qualify and will be required to put down a maximum of 31% of your monthly pay towards your housing payment.
In your mortgage payment, aside from the principal and interest, property taxes will also be included and possibly even homeowner’s insurance. You will be obligated to pay for homeowner insurance if you make a down payment of less than 20%. In addition to these payments you should set aside at least 1% of the home value for maintenance and repairs. To be able to pay for all of the above expenses you should create a budget as you will have to be extremely disciplined when saving up for a home. This is especially true when looking at the Mississauga Real Estate market, it is hot and properties can get quite pricey. Ways that you can save include:
●You will feel more determined to save up, if every month you are saving the same amount, try saving the difference between the rent you pay and the anticipated housing payment. If this too much then start with as little as $100 and then gradually increase it.
●Consider getting a second job to help you accumulate your savings quicker.
●Make it a rule that any bonuses you get, cash gifts, or tax refunds deposit them back into the home buying account.
At first it will be a though start but soon enough you will have a long-term plan that is working well in paying off the monthly mortgage and keeping your house in the end.