If you’re thinking of shopping for a new home, one of the first considerations is price range. You want to know what you can reasonably afford.

How do you figure that out?

First of all, you need to determine the initial out-of-pocket costs. There are often more costs associated with purchasing a home than its actual price. You need to take into account such additional expenses as moving costs, legal fees, and a home inspection, not to mention the costs of prepping your current property for sale (if applicable). 

You should budget around 5-10% of the purchase price for these items. So, if you can afford to spend $500K on a new home, you should be shopping in the $450-475K range.

Do you require a mortgage? Then, the following considerations play a part. For instance, how much money do you have saved for your down payment? What are the minimum mortgage down payment requirements in Canada? How much can you borrow? How much are you comfortable paying per month for mortgage payments? View our mortgage calculator and the current mortgage rates to run a few scenarios. If you require some names of great mortgage professionals, please let us know (we'd be happy to email a few names).

Some home buyers qualify for home buying incentives and rebates. Since some of these programs enforce a maximum purchase price for eligibility, those requirements may form part of your decision.

Another factor to consider are the potential proceeds from the sale of your current home (if applicable). Your REALTOR® can help you determine how much your property will likely sell for in today’s market. Any existing mortgage will need to be subtracted from that amount to determine how much cash will be left.

Of course, you should speak to a mortgage broker or lender who can compute the amount of mortgage funds you can borrow, plus the minimum down payment required (or check out these handy mortgage calculators). Remember, qualifying for a big mortgage doesn’t necessarily mean you should have one. You also need to consider your personal finances and desired lifestyle – and whether or not having a large mortgage is a good idea for you. You may also enjoy our article "Canadian Mortgage Definitions" if you'd like more information on the key terms often used.

Once you have gathered all of your information, you can add any potential sale proceeds to the amount of mortgage you qualify for, add other sources of cash available for this purpose and subtract 5-10% for initial expenses, and you’ll have an idea of the price range you should be considering.

Finally, it’s important to take the time to decide what kind of home you want. Do you want a large backyard with trees? A quiet, family-oriented neighbourhood? Four bedrooms and a finished basement? A two bed condo? Once you decide what you want most in a new home, it becomes much easier to find one that’s in your price range. 

Need help deciding how much you can afford when shopping for a new home?  Contact us with questions.