One of the first questions to answer before looking at homes is simple: what can you actually afford?
And we don’t just mean the maximum mortgage a lender will approve.
There’s a difference between qualifying for a certain purchase price and feeling comfortable with the payment every month. Your mortgage, property taxes, utilities, insurance, maintenance and other expenses all need to fit into the picture.
Before deciding on a price range, it’s also worth looking into any first-time home buyer programs that may apply to you.
Start With a Mortgage Pre-Approval
Before you start seriously shopping for a home, talk to a mortgage professional.
A pre-approval gives you an idea of how much you may be able to borrow based on things like your income, down payment, debts and credit.
It also gives your REALTOR® something much more useful to work with than a rough budget you’ve calculated online.
If you’re approved up to $650,000, for example, that doesn’t mean you need to shop at $650,000. You may decide you’re much more comfortable keeping your search below that.
That’s completely normal.
What Does Owning the Home Actually Cost?
Your mortgage will probably be your biggest housing expense, but it won’t be your only one.
When you’re figuring out what you can comfortably afford, consider:
- Mortgage payment
- Property taxes
- Home insurance
- Utilities
- Maintenance and repairs
- Condo fees, if applicable
- Existing car payments, loans or other monthly obligations
You’ll also need money available for the purchase itself.
Your down payment is only one part of the cash you’ll need. Legal fees, land transfer tax, adjustments and other closing expenses should be part of your budget from the beginning.
Related reading for home buyers:
- What Are the Signs a Niagara House is Right for You?
- Do I Really Need a Home Inspection When Purchasing in Niagara
- Am I Too Old to Buy My First House?
Don’t Forget the Mortgage Stress Test
Canadian borrowers may need to qualify for their mortgage using a higher interest rate than the rate they’ll actually be paying.
This is commonly referred to as the mortgage stress test.
Your mortgage professional can explain exactly how the current qualification rules apply to you and what purchase price you may qualify for.
This is also why we’d rather see buyers get properly pre-approved than spend weeks looking at homes based on an online mortgage calculator.
What Can Your Budget Buy in Niagara Falls?
This is where things get more interesting.
The same budget can give you very different options depending on the property type, neighbourhood, condition and size of the home.
You may be comparing a detached home that needs some updating with a newer townhouse at a similar price. A condo might have a lower purchase price but come with a monthly condo fee. Another property may cost more upfront but need very little work after closing.
There isn’t one property type that’s automatically the better financial decision.
The goal is to figure out which option works best for your budget and what you actually want from the home.
Your Maximum Budget Doesn’t Have to Be Your Search Budget
This is something we wish more buyers thought about before they started looking.
If you’re approved for a maximum purchase price, you don’t necessarily have to search all the way up to it.
Owning a home should still leave room in your budget for your regular life.
You may want to travel. You might have a car payment. You need savings. At some point, something in the house is going to need to be repaired or replaced.
Being approved for the payment and being comfortable making the payment are two different things.
Leave Yourself a Buffer
Homes cost money after closing too.
A furnace can stop working. An appliance can break. Property taxes can change. Your utility bills may be higher than expected.
That doesn’t mean you need an enormous amount of money sitting untouched before you’re allowed to buy a home.
It does mean we’d rather see a buyer leave themselves some breathing room than spend every dollar they have just getting the keys.
What if You’re Deciding Whether to Keep Renting?
If the numbers feel tighter than you expected, buying immediately isn’t your only option.
You might decide to save for another year, pay down debt, increase your down payment or adjust the type of property you’re looking for.
You can read our guide to renting vs buying in Niagara if you’re trying to decide which option makes more sense right now.
Before You Start Looking at Homes
- Talk to a mortgage professional. Get a realistic idea of what you qualify for before setting your search range.
- Choose your own comfort zone. You don’t have to spend the maximum amount you’re approved for.
- Know how much cash you’ll need. Plan for your down payment, closing costs and money you’ll want left over after closing.
- Compare the full monthly cost. Include taxes, utilities, insurance, maintenance and condo fees where applicable.
- See what your budget actually buys. Once you know your range, we can show you the different neighbourhoods and property types available within it.
Frequently Asked Questions
Are condos always more affordable than houses?
Not necessarily. A condo may have a lower purchase price, but you’ll also need to account for the monthly condo fee. Compare the total monthly cost rather than the listing price alone.
Should I leave money in savings after buying?
We recommend it. Having some money left over for repairs, maintenance and unexpected expenses can make the first year of homeownership a lot less stressful.
Can The Barry Team tell me how much mortgage I qualify for?
Your mortgage qualification should come from a lender or mortgage professional. Once you know your budget, we can show you what that budget can realistically buy in Niagara Falls and help you compare your options.
Wondering What Your Budget Can Buy in Niagara Falls?
You don’t need to know exactly what kind of home you want before you start.
Once you have an idea of your budget, we can show you what’s available at different price points and help you compare neighbourhoods, property types and recent sales.
Visit Buy With Us, call 905-357-8067, or email emily@thebarryteam.ca
Planning your next home purchase or sale?
Book a consultation with our team to get the process started.
