Home Buying
Can I buy a Home?
The home buying process can be very intimidating especially if you don’t know where to start. This educational booklet is a combination of information from Consolidated Credit and the government of Canada to get you started on the road to making one of the biggest and most important purchases of your life.
The first question you are probably asking yourself is whether or not you can afford to buy a home. If you can afford it, what price range should you be looking at and will you qualify for the loan? There are a couple things that you should look at when you find yourself asking these questions.
First, you need to know what your income and current expenses are. The Canadian government recommends that your mortgage payment should not exceed 30% of your income. Keep in mind that your mortgage payment is not going to be your only additional expense when buying a home.
How Much Do You Really Earn?
Before you can figure out your housing and debt ratios, you must be clear about how much you earn, in terms of your gross monthly income. Gross monthly income is your income before taxes. If you are paid an annual salary then take that salary before taxes or retirement plans are taken out. Divide it by 12, and that will give you your monthly income.
If you are paid hourly or weekly, take your hourly pay and multiply it by the number of base (or regular) hours you work each week. Then multiply that by 52 (the number of weeks in a year) to give you an annual number. Divide that by twelve (the number of months in a year) to get your monthly income.
Let's say you earn $20/hour and you normally work 25 hours a week. You'll take 20 and multiply it by 25 = 500 to get a weekly figure. You'll then multiply 500 x 52 = 26,000 to get an annual figure. Then divide 26,000 by twelve to get a monthly income of $2166.
In calculating your income, a lender must allow you to include:
- • Child support or alimony, usually if it will continue for at least another 3 -5 years
- • Retirement income, including CPP benefits or a company provided pension as long as it will continue.
If you have income from a side business or if you are self-employed, you'll need a lender that that has programs for the self-employed. If you receive overtime or bonuses, the lender will generally need to document that pay is regular and likely to continue.
| Your annual income | $ __________ |
| Divide by 12 | ÷ 12 |
| Equals your gross monthly income | $ __________ |
| If you are paid hourly | |
| Your hourly pay | $ __________ |
| Multiply by the number of Base | |
| (or regular) hours you work | |
| each week | X __________ |
| Multiply by 52 (weeks in the year) | X 52 __________ |
| Divide that by 12 | ÷ 12 __________ |
