Before you even start looking for a home, you need to know exactly how much home you can afford – otherwise, you could spend time looking at homes that are out of your price range. If that happens, it's hard not to be disappointed later when you view less expensive homes.
To get an idea of what you can afford, you'll need to take into account the following:
You've got to put food on the table, clothes on your back and gas in your car-and have a little fun now and then. You also need to be prepared for emergencies as well.
Your mortgage specialist will help you make sure you have money left over to pay for the necessities of life, as well as some of your lifestyle choices. The following calculations are used by most lenders as a guide to help determine the maximum you should spend on housing costs and overall debt levels:
If your monthly housing and housing-related costs don't leave you enough money for your other expenses, then you have a few options.
You and your mortgage specialist may also need to factor in expenses or changes that you know are on the horizon. Maybe you'll need to replace your car within the next year. Or if you're expecting your first baby you may need to consider the impact of a maternity or paternity leave on your budget in addition to expenses related to having a baby.
When all is said and done, you need to feel comfortable with your mortgage amount, term and payment schedule. And you want to feel good about any sacrifices that you choose to make.
Lock your rate and know exactly how much home you can afford. Start your pre-approval online and an RBC® mortgage specialist will be in touch within 24 hours to help you complete your pre-approval application.