How Much Home Can You Comfortably Afford?

When people start looking at homes, the first number they usually hear is the amount a lender may be willing to approve. It's a useful number, but it answers the lender's question, not yours. Yours is simpler and more personal: what payment can you live with, month after month, without feeling squeezed.

Approved and comfortable are not the same thing

Lenders work from set formulas. They compare your income with your expected housing costs and your other debts, and they test whether you could still manage if rates were higher than the rate you're offered.

What the formulas can't see is the rest of your life: child care, a long commute, the trips you take to see family, the savings you don't want to stop, a plan to change careers or grow your family. A figure that works on paper can still feel tight in practice. A pre-approval, if you have one, is also only an early estimate. It isn't a commitment to lend, and it isn't a target to spend up to.

What goes into the picture

Your income. How much it is and how steady. Salaried, commissioned and self-employed income are each assessed a little differently.
Your existing debts. Car loans, student loans, credit cards and lines of credit all take up part of your monthly budget before a mortgage payment does.
Your down payment. Its size affects how much you borrow and whether mortgage default insurance is required, which adds a cost of its own.
Closing costs. Legal fees, land transfer tax where it applies, and other one-time costs come out of your savings on top of the down payment.
The running costs of a home. Property tax, heating, utilities, home insurance, condo fees if there are any, and the repairs every home eventually needs.
Room for change. Rates may be different when your term comes up for renewal. With a variable rate, depending on the product, either your payment changes when rates move or the payment stays the same and the share going to principal changes. Life changes too: a leave from work, a new job, a car that needs replacing.

Why we start with your budget, not the listing

It's easy to fall for a home first and try to make the numbers fit afterwards. We find the conversation goes better the other way around. We start with what comes in and what goes out each month, settle on a housing cost that leaves you some room, and work back from there to a price range.

The right amount is different for every household, and only you can decide what comfortable means. Our part is to lay out the costs clearly, explain how lenders will look at your situation, and answer your questions so the decision is an informed one.

If you'd like to talk through your own budget before you start looking, we're glad to sit down with you whenever you're ready.