Now that you’ve decided that purchasing a home is in your future, you need put a plan of action in place.  Here are the steps you should be taking:

1. Visit your bank to determine how much house you can afford.  This is commonly called getting pre-qualified for a mortgage.

2. Start budgeting for the costs associated with buying a home.

3. Start putting together a ‘Top 10' list of what you need and want in your home including style and area.

4. Select a REALTOR® you feel confident has the knowledge and expertise to find and negotiate your purchase.

 

Prequalification

The quick way is to simply : Multiply your Down Payment x 4 = Cost of Home you can afford

Pre-qualification should be your first step in your process to  buying a home.  Before you even look at any homes, you need to know how much you can afford to spend.  The amount of mortgage one can qualify for is found from what are known as    qualification ratios.  These are your Gross Debt Service Ratio and Total Debt Service Ratio, or, ‘GDS’ and ‘TDS’.  Your lender will take a look at your monthly income as well as your monthly debt obligation to come up with an appropriate amount you can safely spend on your new home.  Generally, an acceptable GDS ratio ranges from   28-32%.  This means that 28-32% of the household income can safely be set aside to put a roof over your head.  Your TDS ratio is higher at 36-40% and is earmarked to service your entire monthly debt.