Mortgage Affordability 101: How Much Can I Afford?
If you’re thinking about buying your first house, one of the first questions you may ask yourself is, “How much can I afford?” Read the following mortgage affordability tips before you set out to find the home of your dreams:
Consider your annual household income. In addition to calculating your annual household income, consider any income changes that may impact your ability to make your payments. For example, if there are currently two major income sources within your household, would you still be able to afford your mortgage if one was removed? Consider all factors before deciding.
Consider your down payment. Currently, you are required to have at least a 5% down payment when buying a house. The size of your down payment is one factor in determining the size of mortgage you can afford.
Consider your amortization period. If you are simply trying to keep your regular mortgage payments low in order to comfortably fit the payment into your budget, you will probably want to apply for a mortgage with a longer amortization period. However, if you don’t mind a somewhat larger regular mortgage payment in order to save money on interest in the long run, you may want to consider a shorter amortization period.
Consider your closing costs. Closing costs are an often overlooked expense that will definitely help determine how much money you can afford as a down payment.
Consider your property taxes, various types of homeowner’s insurance such as damage, title etc and additional expenses. Lastly, there are a few additional expenses that may impact how much money you have to put towards your mortgage each month. Expenses like property taxes, homeowner’s insurance and even things like home maintenance should be factored in before making your final decision. These costs are often overlooked but should be considered before settling on the home of your dreams.
CIBC helps you answer the question “How much can I afford?”
Buying a home is a big financial decision. When you start out by knowing what mortgage you can comfortably afford and what houses fit into your price range, you will be prepared to find the ideal house for your situation. CIBC also makes it easy, by offering helpful mortgage calculators like the Mortgage Affordability Calculator that lets you enter your information to find out the price range that’s right for you.
For additional information about how much mortgage you can afford or to complete an application by phone, contact a CIBC Mortgage Advisor at 1-866-525-8622.
The information in this article is general only; it is not intended as specific investment, financial, accounting, legal or tax advice for any individual.