(NC) Owning a home can feel like an important milestone, providing a sense of control and stability over your future. It can also be a point of pride and an investment in your equity. And yet, sky-high housing prices across the country often make it feel impossible to afford a home.
In fact, the amount Canadians expect to pay for a house has increased by $100 000 over the past year according to a recent survey by BMO. With buyers across the country expecting to pay an average of $588 000 for their property, it’s natural for would-be buyers to question their options.
Here are some tips to help you figure out if you can afford to buy.
Consider wants and needs
Take time to think about the kind of home you want and what you are willing to compromise on. Asking yourself questions can help you figure out what’s affordable for you. For example, are you willing to pay more for a prime location, or will you be just fine buying further afield? Do you plan on living in a new home for decades or only a few years? Be realistic with yourself and understand you may have to make some changes to this list or make sacrifices down the line. But at least you’ll know where you draw the line when it comes to affordability.
Take stock of your financial position and research what your mortgage could look like. Remember that you will have to pass a stress test to qualify for a mortgage so double check what you can afford based on that qualifying number, not on what you make. There are plenty of online calculators that make it easy to figure this out. And when you know what you’re working with, consider getting pre-approved for a mortgage. That way you’ll officially know your budget, you’ll be ready to act fast when the time comes, and you’ll have time for due diligence.
Ask any questions There are many factors that influence what you can afford to pay for a home, from your credit score to the type of mortgage you choose and the size of your down payment. Everyone’s situation is unique, so it can help to discuss your options with a mortgage broker or specialist. Do your research ahead of time and be prepared with questions about your options.
Find more information at bmo.com/mortgage.