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HOW MUCH CAN I AFFORD?

Monday, January 23, 2023   /   by Ameil Gill

HOW MUCH CAN I AFFORD?

Are you curious as to whether or not buying a home is within reach? It’s important that you feel confident about how much house you can afford before you hit the ground running and start home shopping. The first step in house hunting is getting pre-approved, but in case you’re not quite ready to commit, I’ve outlined a few guidelines that can provide a starting point for answering the question: how much home can I afford?


Most financial experts say housing expenses should be no more than 25% of your total pre-tax (gross) income. This includes your monthly principal and interest mortgage payment, homeowners insurance, property taxes, PMI payments (if applicable), and any HOA/Condo fees.


For example, if your salary is $65,000 per year, your gross monthly income is $5,416 ($65,000 / 12). Therefore, your total housing costs (principal, interest, taxes, and insurance) shouldn’t exceed $1,354 per month (25% of $5,416). 


It’s important to also keep in mind that your total debt should be under 36% of your total pre-tax income. This includes housing costs mentioned above as well as any credit card payments, car loans, personal loans, and student loans. This means your total new monthly payment AND all of your monthly debt should not exceed $1,949 a month (36% of $5,416).


If you have a lot of debt, it may be best to try and pay off some credit cards or other loans first before purchasing a home. It’s also important to remember that lenders are qualifying you based on your GROSS, pre-taxable income, which is typically not your take-home pay, so you should put together a budget to ensure that you are going to be comfortable with your new mortgage payment, and not end up “house poor”. 


If you think it may be time to take the leap and start your home-buying journey, send me a message. I would love to put you in touch with one of my trusted lenders so that you can get a better understanding of what exactly you may be able to afford in our current market!

REMAX Realty One Inc. - The Gill Team
Ameil Gill
50 Burnhamthorpe Road West Sussex Centre Ste #102
Mississauga, ON L5B 3C2
416-884-1359

Information is provided exclusively for consumers’ personal use and may not be used for any purpose other than to identify prospective properties consumers may be interested in purchasing. Data is deemed reliable, but is not guaranteed accurate by the MLS®.
Information is provided exclusively for consumers’ personal, non-commercial use and may not be used for any purpose other than to identify prospective properties consumers may be interested in purchasing. Data is deemed reliable, but is not guaranteed accurate by the MLS®. Copyright 2023 Last Updated January 29, 2023
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