How Much of a Second Mortgage Can I Really Afford?
When you are considering the idea of buying your first (or next) house, there are many things that you need to consider. If you don’t think about the financing of it all, then you really don’t have the opportunity to daydream and look for houses because you don’t even know what your budget will be. When it comes time to deal with the age old question of “how much will my mortgage be,” you should start with the calculations as the very first step and then go on to everything else afterwards.
Where to Begin?
In order to solve the “How much mortgage do I qualify for” question there will be some standard questions. For the most part, mortgage affordability Canada or elsewhere all comes down to the same concept. You need to take a look at what is going on with respect to your overall credit score. If you generally have a good history then you should be set when it comes to lending. The good news is that even if you have some problems or bad marks here and there, then you can still be matched with top lenders!
How Much can I afford?
With respect to how much you can actually afford, the specifics will need to be worked out in an actual formula. However, there are rules of thumb that an expert can help you out with, and those aren’t just based on your credit score but they are mostly based on how much you make as income every month and how much you have going out every month in long term debts and obligations. When people are asking “what mortgage can I afford,” they are really asking, “How much mortgage can I qualify for?” This is simply because if the banks don’t think that you can pay your monthly debts in the first place once they calculate out your potential payments on top of your existing payments, then they won’t even let you touch a mortgage that is too big for you.
Higher Down Payments Can Help
Instead of asking, “how much can I afford?” you should start asking, “How much would my mortgage payment be?” because when you start to do things such as buy points, put down extra money, or qualify for extra programs, then you have a much better shot of minimizing your payment.
In short, you absolutely need to start out the process of any home buying adventure with figuring out your high and low end numbers first. Don’t just daydream about certain houses in certain neighbourhoods and then hope you can make it happen. Start by knowing your numbers and then going hunting from there.