Before stepping into the market, I always encourage people to take a quiet, honest look at their finances. One of the most practical ways to do this is to “test” your future budget.
Try setting aside what you expect your monthly housing costs will be, and live on what remains for a few months. This gives you a clear sense of whether the numbers feel comfortable and sustainable in your day-to-day life. It is a simple exercise, but it can be very revealing.
How Much Can You Afford?
Before we begin looking at homes, it is important to understand what a lender is likely to approve. This helps us focus on options that make sense for you, both now and in the long term.
When a lender reviews your application, they look at several factors, including:
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Your credit history
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Your income and how it is earned
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Employment stability
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Your down payment
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Expected housing costs such as mortgage payments, taxes, and maintenance
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Any existing debt
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Potential rental income, if applicable
All of these pieces come together to determine a comfortable borrowing range.
Understanding the Basic Guidelines
There are two general guidelines that lenders use to assess affordability.
The first is called Gross Debt Service, or GDS. This looks at your housing costs and compares them to your income. As a general rule, your housing expenses should stay within a manageable portion of your monthly income.
The second is Total Debt Service, or TDS. This includes all of your monthly obligations, such as credit cards, loans, and vehicle payments, along with your housing costs. The goal is to ensure that your overall financial picture remains balanced.
These are guidelines, not rigid rules, but they offer a helpful framework for planning.
Taking the Next Step
When you feel ready, I usually suggest speaking with a mortgage broker or your bank. A broker can look across multiple lenders and help you find options that fit your situation, especially if your income or finances are a little more complex. Their services are typically covered by the lender, so there is no cost to you.
This step gives you a clear understanding of what is possible and allows us to move forward with confidence.
If You’re Not Quite There Yet
If things are close but not quite where you would like them to be, there are gentle ways to improve your position over time:
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Consider a slightly smaller purchase to begin with
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Pay down existing debt where possible
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Build a larger down payment
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Review assets that could be repositioned
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Take a closer look at monthly expenses and where adjustments can be made
There is no need to rush. Buying a home should feel stable and well-supported. When the timing is right, everything tends to come together more naturally.