Crunching the numbers
With our minds made up, our priorities listed, our realtor at the ready and a wee bit of a panic to boot, our next step was to crunch, re-crunch and re-re-crunch all of our numbers. And boy, are they big numbers.
Now, of course, prior to deciding to buy we had discussed budgets. We knew what we had in salary, savings, and monthly bills, such as metropasses and food.
We ballparked the new bills that would come with home ownership, such as property taxes, home insurance and repairs. We figured out how much we'd feel comfortable spending each month, and each year, and how much we would want to save, then calculated how much that left for spending on our home. A common figure for acceptable home-related expenses is about one-third of your income.
We'd been socking away money for our downpayment fund, and felt comfortable with the idea of paying the required Canadian Mortgage and Housing Corporation insurance for downpayments between five and 20 per cent. (A minimum five per cent downpayment is needed).
We also had the support of our family, and an offer to co-sign if necessary to help us with our mortgage approval.
Once we knew what we thought we could afford, and that this amount wouldn't mean living in a falling down home in a sketchy area, the next step was to find out how much the bank was willing to let us have — a figure we hoped would be in synch with our expectations!
We had been monkeying with online mortgage calculators, but were now ready to call in a pro and get a real estimate. We asked our friends and family for advice and decided to go with a mortgage broker who had been recommended to us.
Within a few hours, and after answering a lot of questions about our finances, savings, and expenses, we had a figure and a pre-approval document in hand, with the exact amount we had expected. (Guess all that number crunching really does pay off!)
Pre-approval is a good thing to do before you hit the street and start looking at houses. As first-time buyers, knowing the exact amount we can borrow keeps our hunt realistic.
And having this info before we started doing home viewings meant that we didn't risk the heartbreak of falling in love with a property we couldn't afford.
Getting pre-approved can also help speed up the closing, as the necessary credit checks have already been completed prior to making an offer.
It also makes the numbers seem a little more real. Suddenly you're not just playing with astronomical figures, but real money complete with monthly payment amounts and interest calculations. As I've mentioned before, Mr. Speedy and I have never spent this kind of money on anything before in our lives — our largest expenses to date have been our degrees and our wedding, and those costs don't nearly compare to the investment in a home!
With solid numbers to base our decisions on, and fret about, and the assurance that we will, in fact, be able to secure a mortgage, we're now ready to start looking at properties on the market!
Now our new worry is how we'll know when we've found the "right" place!
Catch up on the house hunt:
Home hunting makes me ... nauseous?
How do we know when the house is right?
Finding Mr. or Mrs. Right ... Realtor, that is
Home hunting: Exciting, terrifying, all-consuming
(Shutterstock photo illustration)
Jennifer, I am in the same situation as you. I feel everything you are going through. I was wondering if you would be able to recommend a mortgage broker, if you think he/she is good. Many thanks!
Posted by: Nav | April 02, 2009 at 11:08 PM