Sustainable housing and real estate in Kitchener-Waterloo Region


Can you afford to buy a home?
January 13, 2009, 2:55 am
Filed under: Buying, Rebecca Sargent | Tags: , , ,

Would you like to buy a home, but don’t know whether you can afford it or not?

Here’s what you can do:

– Check your credit score. You can do this online at http://www.equifax.ca for about $25.
You are probably looking for a score of at least 600 to be able to qualify for a mortgage. There are many ways you can begin to improve this score. Make sure to make at least your minimum payments on your credit cards each month, and pay all of your bills on time. If you have a large amount of debt, talk to a debt counselor or banker to find out what can be done to up your score. Try Debt Freedom Canada at (519) 342-2524 (located in behind Century 21’s current location at 1770 King Street, Kitchener).

– If your credit score looks good, and you are steadily employed (typically for at least 2 years): you should consider talking to a mortgage broker about your ability to qualify for a mortgage. Mortgage brokers will look at your employment status and history. This involves looking at your gross monthly income and the length of your employment (usually 2 years of steady work). They also look at your credit history (any debts you have, debt balances versus your credit limits, how you handled debt in the past, missed payments, late payments, etc.), your assets (stocks, bonds, personal property), and the value of the property you want to purchase. Mortgage brokers are sometimes able to help you build a down payment through special programs. Try Discount Mortgage Canada (who shares an office with Century 21) at 1-866-833-8601 or 519-570-9684 to find out whether you are able to qualify for a mortgage.

– Can’t make a down payment? The Region of Waterloo (which includes Waterloo, Kitchener, and Cambridge) runs an Affordable Home Ownership Program. This program allows first time home buyers to obtain a down payment loan of up to $10,000 (payable when you sell your home). This applies for homes under $226,000, for those with household incomes of less than $68,000. Check out the full details at http://www.region.waterloo.on.ca/aho.

– Mortgage payments can be similar in amount to your current rental payments. The only difference is that instead of losing the money you pay into your residence to a third party, mortgage payments go towards increasing YOUR equity. If you can qualify for and afford a mortgage, home ownership makes a lot of financial sense.

Things to consider:

– Closing costs typically range between 2-5% of your mortgage loan and include things such as land transfer, title policies or insurance, recording fees, inspections, attorney’s fees and lenders fees. This works out to approximately $3,500 to close for a $250,000 home purchase.

– Closing (the day you gain possession of your new home) typically takes place between 30-120 days after signing the agreement.

– A deposit is usually required at the acceptance of the agreement of purchase (at the time your offer is accepted by the Seller). Deposits usually start at around $1,000.

– Lenders require that monthly payment ranges for your mortgage be between 25-8% of your gross monthly income. This would include the principal on your loan (P), the interest on your loan (I), property taxes (T), and homeowner’s insurance (I). You monthly PITI payments (as these are called) plus all of your debt payments should range between 33-38% of your gross monthly income.

If you have any questions, please feel free to contact me at rebecca.sargent@century21.ca!

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