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Buying a home is a major step that will affect your finances. Because of that, you need to plan ahead how much you can afford for a house before you start looking for one. Having a clear picture of your financial situation will also help you prepare before meeting a mortgage broker or a banker. Here are the things to consider before buying a home as well as extra costs you should be aware of.
First, calculate how much you are spending on a monthly basis. This includes groceries, child care, tuition, credit cards and entertainment expenses.
Second, calculate how much you can afford to spend each month for housing. As a thumb rule, your monthly housing costs should not go beyond 32% of your gross monthly income. While your monthly debt load should not be more than 40%.
Third, save money in advance for the following expenses. This can be the deposit, home inspection and appraisal fees, HST, insurance, down payment etc.
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