Are you financially ready to buy?

So, you’ve finally decided that homeownership is right for you. Now you need to determine if you are financially ready to buy a house. Check out these formulas to calculate the size of your loan and evaluate your current financial situation.

Knowing your net worth is important because you will need this information when you discuss a mortgage with your lender.
Your net worth is the amount left over once you’ve subtracted your total liabilities from your total assets. It will also give you a snapshot of your current financial situation and show you how much you can afford to put as a down payment.

Get a Mortgage Pre-Approval

Once you’ve made the necessary calculations and feel that you are ready to obtain a mortgage, it’s a good idea to select a lender to get you pre-approved. This means that the lender will look at your finances to establish the amount of mortgage you can afford. At that time, the lender will give you a written confirmation or certificate for fixed interest rate good for a specific period of time.
Some buyers may not wish to pursue a mortgage pre-approval until they have found the home they want to buy. However, the idea of having a pre-approved mortgage mount makes the search for your new home much easier and less time-consuming because you have a good price range in mind.

Some of the things you will need to have with you the first time you meet with a lender are:

• Your personal information, including identification such as your driver’s license
• Details on your job, including confirmation of salary in the form of a letter from
  your employer
• Your sources of income
• Information and details on all bank accounts, loans and other debts
• Proof of financial assets
• Source and amount of down payment and deposit
• Proof of source of funds for the closing costs (these are usually between 1.5% and 4% of the purchase price)

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