Mortgages - How much do I need to make? How much do I need to have?

Dated: April 22 2024

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I want to buy a home in Edmonton! how much do I need to make? How much money do I need to have saved? What about debt? Minimum Credit score? What does this mean for the Edmonton housing market?

Today we dive into these questions and give you a general calculation you can do at home.

Lately we have had a lot of buyers either go to their bank or to their mortgage broker and have been surprised at what their bank had to say. Either they didn't qualify, or they had to jump through hoops when they figured it would be a simple acceptance.

Today we try to narrow down what to expect if you are in a certain income bracket, how debt can change the formula, etc.

Income needed to buy a home

Lenders look at several things, but if they are looking strictly at income, a 5% to 10% down payment, then you are looking at roughly 4 times your income.

For a $300,000 home = roughly an income of $75,000.

This is with zero debt.

For debt, lenders look at payments. 

Debt Payments

Roughly for ever $100 monthly interest payment, you are lowering the mortgage amount you would get accepted for by about $10,000.

So that means if you had an income of around $75,000 with a $400 monthly payment, then the would be $300,000 acceptance amount goes down to about $260,000.

Condo Payments

In Edmonton when you get down to the $260,000 priced homes you are looking more at apartment condos or town house condos, which makes it tricky because then the bank looks at the condo fee payments as well.

What Credit score is needed?

Generally, lenders expect to see at least a 680 credit score.

If you are under 600 you should work on getting that score up.

Or at least have 20% down.

What Credit is needed?

Especially for first time home buyers, expect to have at least 2 forms of credit.

For example, two credit cards, a credit card and a car loan, a credit card and a line of credit, etc.

More than 5% down?

Good news is that if you are putting at least the 20% down then there are more programs and options to make things work.

If you are putting 20% down, then you are looking at 

Roughly 5X your income.

This would mean that the $300,000 home would need an income of $60,000.

So, with the average Edmonton Single family home at roughly $490,000, with 20% down you would need an income (or combined income) or roughly $100,000.

or if you are looking at 5% down you would need roughly $125,000 for your household income.

Of course, this is not set in stone and it is always good to check with your mortgage broker. That said, these are great general calculations you can do at home.

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Derek Keet

Think RE/MAX Elite, think Derek Keet. With over 20 years of personal experience in residential, commercial, and rural transactions, Derek is an accomplished international business leader who brings ....

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