Your “Dream Home” becomes a nightmare when you end up “house poor,” with most of your income going to pay for the mortgage and unexpected costs, with only a little left over for enjoyment.
When buying a home you need to be practical, realistic and informed. Lakeview Realty Inc. real estate specialists can assist you in finding the “right home.” We can also assist you in evaluating mortgage options, obtain financing and review the anticipated costs involved.
Are you considering applying for a Mortgage?
Why not make your first stop with our “In House Mortgage Specialist.”
Within this website, you will find an outline of the normal costs involved in buying a residential “resale” home and a guide for calculating mortgage payments (at different rates and amortization periods — Note the amortization period has nothing to do with the term of the mortgage. The term is the length of time before maturity and refinancing whereas the amortization period is the period that is used to calculate monthly payments.. this is a very basic definition).
If you require any assistance applying for a Mortgage, please contact us to set up a call or appointment.
What You Can Afford.
There are a few things to consider:
Down Payment & Closing Costs:
This is the amount that you have available on-hand to initially invest in a home, bearing in mind that you have to keep a “reserve” for closing costs and moving. The land transfer tax is the biggest closing cost. See the chart in the following pages, plus the other costs involved.
You will be required to make “a Deposit” in the downpayment when you make an Offer, and the balance of the down payment will be paid on closing. The difference between the purchase price and your down payment will be covered by the mortgage loan.
How much can you afford to borrow?
A conventional mortgage is a mortgage that does not exceed 75% of the sale price of the home, with a down payment of 25%. There are other options available. A first mortgage can be obtained for up to 95% of the value of the home with as little as 5% down. There are qualifications and conditions which we would be happy to discuss with you and provide the details.
The first step is to calculate the amount which you can afford to repay the financial institution for principal and interest on a monthly basis. Click here to try our Mortgage Calculator
Financial institutions do this by calculating your debt/service ratio.
They calculate this on two different levels.
The GDS. (gross debt service) is the maximum amount which they feel you should pay for Principal & Interest (P & I). Typically, 32% of your gross combined monthly income is the amount most commonly used.
The TDS (total debt service) is the other consideration. This amount factors in all other monthly expenses for items such as car loan or lease, personal loan(s), etc. Typically, 40% of your gross combined monthly expenses along with your mortgage payment is the factor used for TDS. This means that your monthly payments for P & I, plus your other monthly fixed costs would not exceed 40% of your gross, combined monthly income.
Interest Rates & Other Variables:
The amount of the mortgage you can arrange, based on payments you can afford, depends on the interest rate and the amortization period you use. The lower the rate, (and the longer the amortization period) the larger the mortgage amount you can afford will be.
Terms of the mortgage and other things to consider might be:
-How open is the mortgage? (When can you pay it off without penalty/ or portions of it?)
-Is the mortgage portable? (Can you move it to another house if you buy another in the future?)
The details on this page are for general informational use only.
Please contact us today to discuss your specific financial and mortgage options.