It’s a simple question, but there isn’t always a  simple answer. It really depends on 2 things:

1. How much of a down payment do you have?
2. What mortgage payments can you afford?

A bank will use additional criteria to evaluate whether they will lend you money to buy a home including calculating your net worth, checking your credit rating and evaluating your earning stability (cash flow). They will also evaluate the property you choose.

Many banks will work with you to pre-approve you for the maximum amount you qualify for based on the above. It’s a straightforward process. You complete a financial application, provide proof of employment/earnings and proof of the down payment.

In order to be comfortable with taking on the long term responsibility of a home however there is some research and number crunching you can do:

1. How much will is cost to complete the purchase transaction? You will pay legal fees, appraisal costs, property tax adjustments and purchase taxes – these amounts can  add up.
2. How much will it cost to operate the type of home you’re looking at? Condo fees, utilities and property taxes are a few of the monthly expenses you might expect.
3. What will it cost you to maintain the property in terms of repairs and upgrades?
4. Incorporate all these costs into a budget – can you afford it?
5. Have you got a little set aside in case something goes wrong? A big repair, lost income etc.?

It is worthwhile to go through this process before you buy a new home so that you can focus on negotiating a good price on the right property rather than on whether or not you can afford it.