When prospective homebuyers step into our London office, the first words out of their mouths are usually, “can we afford it?” Even if you have a decent understanding of how mortgages work and have worked hard to save up a down payment, it can take some time to get a good grasp on how mortgage lenders process your application and determine that coveted number: your pre-approval amount.
And it’s no wonder: in the past few years, mortgage approval rules have completely changed, and banks take a very thorough look at your financial picture before determining your affordability.
If you’re just starting to think about the home buying process, using online resources, such as a mortgage calculator, is where many hopeful home buyers start. We have a very simple and easy mortgage affordability calculator on our website, which takes into account your annual income, current debt load and the additional costs of home ownership, such as property tax charges, condo fees and heating costs.
While this calculator is a great place to start and can help you get a sense of the size of mortgage that you will be able to afford, keep in mind that it’s not a one-size-fits-all approach, as banks also take into account specific aspects of your situation, such as your credit score and down payment amount. If you are looking to understand your mortgage affordability in more detail, our mortgage payment calculator examines a more detailed scope and helps you understand the way that your payments will be structured over time, including how much interest you will be paying over the life of your mortgage.
In addition to all the factors that go into getting approved for a mortgage, it’s also important to assess the amount of debt that you are comfortable carrying. It’s understandable if you are eager to see how much home you can afford, but if there are homes in your area for less than your pre-approval amount, you may wish to think about whether you would be happy in a less expensive home with a smaller mortgage. Just because the banks say yes doesn't mean you have to max out your financing options!
We work for you at no cost to you. This means that if you have questions about how affordability works or what level of debt you should be comfortable with considering your unique financial situation, our mandate is to give you honest, professional advice that is in your best interest.
Thanks for reading!
Your London, Ontario Mortgage Brokers at Dominion Lending Centres Forest City Funding FSCO# 10671