Finding Out If You Are Financially Ready To Own a Home

It isn’t particularly beneficial to fall completely head over heels for a property and blow out all your resources to acquire it, only to find out in the end that you still won’t be able to afford.

Buying a home should be a slow, deliberate process. And once you have decided to buy yourself a home, the first step is to determine how much you are willing to spend to become a home owner. Remember, paying for the purchase of a house is only the first in a long line of expenses. You can count on property taxes, renovation expenses etc to come a-knocking once the purchase is finalized. So leave some room for these as well.

Here are a few simple steps to figure out if you are financially able to become a home owner.

What Is the Optimum Purchase Price for You?

A peaceful home is only so if you are not losing your sleep thinking up new and weird ways of paying for it. As a brand new home buyer, the first thing you need to do is create a budget and then work up the these ratios.

Realistically speaking the maximum price that you can afford for our home depends on these ratios as well as other factors. You will need to account for mortgage interest rate as well as down payments.

Does Your Current Debt Load Allow You To Own A Home?

GDS and TDS ratio calculators can be found online for your ease.

Gross Debt Service ratio (GDS): This takes in account all your new housing costs including heating, mortgage payments and heating etc. If you are to comfortably afford a home, GDS should not be more than 32% of your gross monthly income.

Total Debt Service ratio (TDS): this measures all debt obligations such as car loans, credit card bills etc. Forget about the new house of this is upwards of 40% of your gross monthly income.

DO You Have Money For Other Expenses?

People are surprised when they figure out that purchase price, down payments and mortgages are the least of their worries when it comes to purchasing a home.

Therefore it is important to have some money tucked away as cash for emergency repairs, renovations and bills. Also, the monthly take home pay should be enough to pay for life’s necessities such as food, entertainment and clothing and still be able to meet the monthly mortgage payments.