ARE YOU FINANCIALLY READY TO BUY?

We all want to know that when we have decided that we want to buy a home, that we are ready. There are some things you can do in advance to ensure you are prepared financially.

Source: CREA

Assess your present  household budget and your  annual income to determine  if you are eligible for a  mortgage and how much  you can comfortably afford. Also check out the Mortgage Affordability Calculator  at http://www.REALTOR.ca.

What do lenders require?
Mortgage lenders use two calculations to  help determine your eligibility for a mortgage
– your Gross Debt S ervice (GDS) ratio and  your Total Debt Service (TDS) ratio.  Your GDS ratio is the percentage of your  gross monthly income used for mortgage payments, taxes and heating costs or – if  you are buying a condominium – half of the  monthly maintenance fees. As a general rule  of thumb, your GDS ratio should not be more  than 32% of your gross monthly income.

Your TDS ratio is the percentage of gross  monthly income required to cover monthly
housing costs, plus all your other debt payments, such as car loans or leases, credit
card payments, lines of credit payments and any other debt. Generally, your TDS ratio
should not be more than 40% of your gross monthly income.

Have you been pre-approved?
Getting pre-approved for a mortgage before  looking at properties gives you a more
realistic expectation of what you can afford.  However, keep in mind that the preapproved
amounts can overestimate what  you can actually afford to pay.

Pre-approval does not guarantee you will be  approved once you actually apply if market
conditions, interest rates, or your personal  circumstances change.

Do you know your credit rating?
Order a copy of your credit report to make  sure it does not contain any errors because
lenders will check it before approving you  for a mortgage. A credit report is a summary
of your financial history and shows whether  or not you have had any problems in the
past paying off debts.

The Financial Consumer Agency of Canada  (FCAC), a federal government agency, has
tips on how to order your credit report for  free and how to improve your credit rating.
Visit FCAC’s website at:  http://www.itpaystoknow.gc.ca.

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About Kim Mays

I live and work in beautiful Lanark County, just 45 mins west of Ottawa, the nation's capital. My family and I love it here, surrounded by all the best this community has to offer - abundant lakes, wildlife & nature, fabulous shops, great schools, and plenty more. As a REALTOR with Details Realty, feel free to give me a call if you are interested in relocating to the area, or if you have a home your are thinking of selling. I offer full real estate service for as low as 2.5% and never more than 3.5%. You can contact me at 613-812-1444. I would love to help you out!
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