Are You Financially Ready to Own a Home?

Once you have determined if home ownership is right for you, the next step in becoming a new homeowner is considering if you are financially ready to own a home. This step is critical for your future financial health and to save you from the frustration of looking at homes that are beyond the price range that makes sense for your financial goals.

Are You Financially Ready to Own a Home?

In this step, you will be looking at what you are spending now and how that affects what you can afford. You should look at everything you currently spend money on, including household expenses, entertainment, loans and debts, donations, and savings. Once you have that figure, deduct it from your net income to determine the maximum amount you have for the monthly payment and other expenses related to home ownership. This figure can then be used to calculate a maximum home price.

This is not necessarily what you’ll be looking to spend, however, as you should also consider affordability factors and the funds you have available for the upfront costs. The two affordability rules can be helpful here. The first rule states your monthly housing costs should be no more than 32% of your average gross monthly income. The second rule is that your monthly debt load, including housing costs, should be no more than 40% of your average gross monthly income. You can get helpful calculators and worksheets by visiting this homebuying step-by- step workbook by the Canada Mortgage and Housing Corporation.

If you have gone through this step and found you aren’t quite in the financial position you need to be, all hope is not lost. You now have the knowledge you need and can work on your financial health to make positive strides toward your goal of home ownership. It may be tempting to proceed despite learning you aren’t quite there, but the important thing is to time things properly so that you will be able to continue enjoying your lifestyle while you are enjoying your new home.

Once you have determined you are financially ready to own a home, the next step is securing financing. At the BlueRock Wealth Management, we are happy to meet with you to discuss what is involved for pre-approval so you can confidently begin looking at homes in your price range. Our goal is to assist you in any way we can so your homeownership and future financial goals go hand in hand. Call today with any questions you may have.

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