Buying your first home
It is indeed a most exciting moment when you can finally buy your first home in Canada. You want to make sure you think every step through and plan for every expense, because there is so much more involved in this process than simply coming up with the money for a down payment.
Most people who buy a home in Canada have to get a mortgage and put a down payment of minimum five per cent. It is considered safer to have at least 10 per cent for your down payment; having more than 20 per cent can exempt you from paying mortgage insurance.
Preliminary steps to home ownership
The first thing you will need in order to obtain a mortgage is good credit. Order a copy of your credit report from one of the two major credit-reporting agencies and go over it to see your vulnerable points. If you feel your credit could use some improvement, take some time to work on it before you apply for a mortgage.
To find a great home you need a great realtor. Take your time to shop around for a realtor who has experience with the kind of home you are looking for, access to numerous listings and who seems genuinely invested in helping you find the best deal.
Talk to the realtor about the things that are important to you in a home, but keep a realistic approach. Many Canadians get what is called a “starter home” and then they work their way up the property ladder. Be ready to accept that your price range may not cover all the features you want in a house.
Get pre-approved for a mortgage
The next step is to go to a bank and get pre-approved for a mortgage. Only then you will know for sure how much money you can spend.
There are different types of mortgages; they can be open or closed, with fixed or fluctuating interest rates and with different term times (after which you can renegotiate the mortgage).
Nevertheless, do not imagine that all the money you get will go on the actual purchase. Buying a house has many hidden costs such as inspections, property taxes, mortgage insurance, property appraisals, legal fees and home insurance. For example, the HSBC Mortgage Guide estimates that these extra costs can be up to four per cent of your purchase price. Enlist the help of your realtor and of your loan officer to figure out everything you need to budget for.
Once you know your budget, you can start looking at properties. Be aware that it’s unlikely that a home will look exactly like in your dreams and, even if it does, it does not mean you should rush to make an offer. Artful approaches like home staging (arranging the furniture in such a way to bring out the potential of the house) can sometimes distract you from important flaws.
Never go through with an offer without a home inspection. Some flaws may make you back out of the offer altogether, while others may be manageable and could get you a lower purchase price.
When you find a property that appeals to you, you should ask your realtor to make a Comparative Market Analysis to see if the home is worth its price. Then you can make an offer and start negotiating. It is acceptable to ask the owner to make certain changes and repairs as a condition for the purchase.
Once your offer has been accepted, you can go to the bank and finalize the mortgage process. After the legal documentation is completed, you can move into your new home on the date you and the seller agreed upon.
The process of buying real estate in Canada can be long and complicated, but no one can deny that owning a home can give you a great sense of stability and achievement. Rents are high, and, if you can afford the down payment, it makes perfect sense to put the rent money toward a place you can call your own.