For many Canadians, investments are vital, such as buying their own house, or condos. Despite the economic issues, rising home prices, yet, they are still looking to buy a house.
Buying a house in Canada could be stressful and complicated when you don’t know the procedures on how to purchase one. It does not mean that it is impossible, but because certain factors must go hand-in-hand to secure the success of the overall process.
Everything you need to know
Many people are shopping around, looking to buy a house. However, some people don’t know when and where they should start.
It is crucial to have the right resources and knowledge when purchasing your own house in Canada. With the right information, you will get the right plan and the right budget that would fit your financial situation.
I know you are eager to start buying your own home. The first thing you need to do is ask yourself a simple yet tough question “Am I ready to buy a house?”.
These are some question that you should also consider;
- Do you have enough savings for a down payment?
- Is your salary enough to manage monthly mortgage payments?
- Am I up to date with the current condition of the real estate market?
- Are you prepared to settle down?
How to buy a house in Canada?
Buying a house in Canada can be easy if you follow and understand these steps.
Step 1. Decide if homeownership is right for you
Being a homeowner requires a lot of responsibilities, stability, and financial discipline.
Does it make sense for you to buy a home or stay renting an apartment?
The view of owning a home may take feelings of excitement and achievements. However, it may not always be the smartest thing to do based on a “financial or property” rationale alone.
Step 2. Save for a larger down payment
For instance, if your score is not at an ideal range, buying a house with poor credit won’t be easy. However, to get a home loan with poor credit you need to hand out a larger down payment for the lenders to approve your home application. In Canada, people make down payments between 5% to 20% depending on the total value of the property.
Bigger down payment will save you a thousand dollars. You don’t need to pay for mortgage default insurance if you provide a 20% percent down payment; it will also help build equity in your property.
You may also have considered putting aside some money for a closing cost (that is generally 1.5 to 5% of the home purchase price). Closing cost may include the following:
- Land transfer tax– Calculated as a percentage of your home value. Note that first-time homebuyers are eligible for a tax rebate for these expenses (particular places such as Ontario, British Columbia, and Prince Edward Island, and in the City of Toronto).
- Lawyers fee– Expect around $1,000 to $1,500 in legal fees and outlay.
- Title insurance – This insurance is to protect the lenders in case of an ownership dispute, and it usually costs up to $500.
- Home inspection– This will cost you up to $500. It is not mandatory; however, it is highly recommended to include a home inspection as a condition of your offer. This could expose unseen problems with the property before you buy it.
- Mortgage default insurance– Also known as “CMHC Insurance”, which is a mandatory insurance policy for those who will purchase a house with a less than 20% down payment.
Step 4. How much house you can afford
After putting savings in your account, do the math and ask yourself how much money you can afford to borrow. Then ask yourself, how much are you able to put down towards your monthly payments on a basis without feeling hurt.
It is a good idea to buy a house, but never to get something that you can’t really afford.
Step 5. Mortgage pre-approval
Once you decided to become a homeowner, saved enough funds for a down payment, and figure out set up how much house you can afford. Make sure now is the best time for you to apply for a mortgage loan.
A mortgage pre-approval makes the entire process smooth for you. After the lenders assessed your documents, they will now be able to set a specified amount of money you can borrow, as well as the terms and interest rates.
Qualify for a home loan with bad credit might be difficult, so better to speak with a licensed mortgage professional to get some advice.
Step 6. Find your dream house
The interesting and fun part is researching for your new home.
After getting approved with a mortgage loan, you are now in a spot to go hunting for your dream property full of confidence.
Step 7. Closing the deal
After you find the house that you desire, you may now submit an offer to purchase. The Offer to Purchase (OPT) is a necessary document and includes terms and conditions under which you are pleased to purchase the property.
Once your offer is acknowledged, you will now deposit the down payment, through the help of your mortgage broker. The mortgage broker is responsible to finalize your mortgage financing and organize for a home inspection (home inspection is optional).
Being a homeowner is expensive and a lot of responsibilities. However, following those 7 steps will simply make the process smooth and easy. Buying a house is very exciting, with the right knowledge and the right process, you can get and live in your new house.