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Is now the time to Jump?
11.20.2005The Calgary Sun Understanding homebuying costs and establishing a budget are important first steps when deciding to end your renting experience and invest in your dream home. So we decided to ask the experts: How do you determine how much house you can afford? Figuring out the mortgage you qualify for is an important first step, says Trish Hart, mortgage agent with Invis. "What will the bank offer you? The dollar amount you qualify for can actually be simple to figure out. Essentially, you need to realize that 32 percent of your gross income will go into what we call a housing ratio. That is the principal plus interest plus an allotment for heating and property taxes," says Hart. "For example, if you were to secure a $100,000 mortgage at five percent over 25 years, with a principal of $582, $100 in property taxes and $85 for heat, your gross income would need to be approximately $29,000 a year," says Hart. "Many people know what they take home from each cheque but few consider what their gross income is. Essentially one-third of each cheque goes to taxes, one-third is for living costs and entertainment and so it's not unreasonable to consider that one-third would be appropriate for housing." Taking into consideration any outstanding debt, as well as other payments, is also key when securing a good mortgage. When considering what your dream house is and whether you can afford it, you must examine your needs, says Charron Ungar, vice-president of product development for Homes by Avi. "You really need to weigh what is important to you, because it all factors into the cost of the home. How many bedrooms do you need? Are you looking for something traditional? What are some community features that are important to you?" says Ungar. Most new home salespeople work closely with banks to offer customers preferred rates or even trade-in programs, so asking the right questions can really ease the process. "Builders often buy these rates in blocks so they are able to offer the homebuyer preferred rates. Trade-in programs are also available with some builders where you can actually apply your existing home to the down payment or price. There are definitely options to examine." With rates still at a 45-year low, now is a good time to make the leap, says Hart. "Rates aren't going to stay low forever so if you can make the jump, now is a good time." Illustration:
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