Determine What You Can Afford

Purchasing a home involves one-time costs and monthly expenses.

The largest one-time cost is the down payment. It usually represents between 5 - 25% of the total price of the property.

In addition to the actual purchase price, there are a number of other expenses that you might be expected to pay for. These are listed in the following table:

Typical One-Time Expenses

EXPENSES	PAID
Mortgage application & Appraisal fee	At time of application
Property inspection (Optional)	At inspection
Legal fees & disbursements	Closing
Property Survey sometimes provided by seller	Closing
Land transfer tax	Closing
Adjustments for fuel, taxes, etc...	Closing
Mortgage insurance (also application fee if applicable)	Closing
Home & property Insurance	Closing and On-going

Typical monthly costs incurred with home ownership are mortgage payments, maintenance, insurance, condo fees, property taxes and utilities, See the "What You Can Afford" Worksheet to help you estimate the approximate purchase price of a home you can afford.


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What You Can Afford Worksheet

Step 1

Calculate Your Gross Debt Service Ratio (GDS). "Most lenders say that your monthly housing expenses (principal, interest, and taxes) should not exceed 32% of your family income (before personal income taxes)." To calculate your Gross Debt Service Ratio (GDS): Take your total monthly gross (before tax) income. $ ____________________ Multiply it by the maximum GDS Ratio (32%). x .32 $ ____________________ This is the maximum amount available for your mortgage payment (principal and interest), property taxes, and 50% of condo fees (if applicable). $ ____________________ Example: If the gross family income is $ 66,000. per year, or $ 5,500. per month, no more than $ 1,760. ( $ 5,500. x 32% ) can be applied to housing expenses.

Step 2

Calculate Your Total Debt Service Ration (TDS): "Your TDS takes into account monthly housing expenses plus other debts and loans you may have." To calculate your Total Debt Service Ratio (TDS): Take your monthly gross income before taxes. $ ____________________ Multiply it by the maximum TDS Ratio (40%). x .40 $ ____________________ Subtract your regular monthly expenses (e.g. credit cards, car payments, personal loans). $ ____________________ This is the maximum amount available for your mortgage payment, property taxes, and 50% of condo fees (if applicable). $ ____________________ Example: If the gross family income is $ 66,000. per year or $ 5,500. per month with two car payments totalling $ 575. per month, a student loan of $ 150. per month, and credit card payments of $ 175. per month, no more than $ 1,300. of the monthly income can be applied to housing costs ($ 5,500. x 40% = $ 2,200. - $ 900. = $ 1,300.).

Step 3

Calculate the amount available to apply to your monthly mortgage payment. This figure will be used to calculate how large a mortgage you are eligible for. To calculate this amount: Identify the lower of your GDS or TDS: $ ____________________ Subtract an approximate monthly amount for property tax. $ ____________________ This is the amount used to calculate how large a mortgage you are eligible for. $ ____________________

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Obtain a Pre-Approved Mortgage

Having a pre-approved mortgage will give you the confidence of knowing exactly what you can spend on a home before you start looking. You will also be protected against interest rate increases while you look for your new home.


See Glossary of Terms for definitions of mortgage terminology.

Finalizing Your Mortgage

Once you've found the home you want to purchase, there are some documents you'll probably be asked for in order to finalize your financing. They will include: