Can I Afford Home Ownership?

CAN I AFFORD HOME OWNERSHIP? 
 

Buying a home is an emotional and financial investment. When buying a home and being a home owner for the FIRST time it is important to know exactly what costs are involved. Once you have made the decision to go from renter to home owner some additional costs will include:
 

• Down payment
• Mortgage payments
• Property tax and insurance
• Maintenance and repair costs
• Appliances, furniture, gardening equipment, window treatments, etc

 
PRE-APPROVAL – This step is important so that you know what you can afford and what type of homes to look at.
 
Questions your lender will ask:
 

• Details about your job, including confirmation of salary from your employer
• Details about all bank accounts, loans and other debts
• Details of financial assets
• Source and amount of down payment and deposit
• Proof of source of funds for closing costs (estimate 2% of the purchase price)

 
Lenders follow 2 simple affordability rules to determine how much you can pay:
 

1. Gross Debt Service (GDS) – your monthly housing costs should not be more than
32% of your *gross household monthly income. Housing costs include monthly
mortgage principal & interest, taxes and heating expenses (P.I.T.H.). MONTHLY
INCOME X .32 = GDS
2. Total Debt Service (TDS) – your entire monthly debt load should not be more than
40% of your *gross household monthly income. This includes housing costs and other
debts, such as car loans and credit card payments. MONTHLY INCOME x .40 = TDS

* Gross salary is income before taxes