7 Steps to Buy a House in Canada
Irrespective of the ongoing third wave of covid-19, real estate remains a valuable investment in Canada. In fact March saw the Canadian real-estate market hit a new record with the sale of 76,000 houses. The increased supply resulted in reduction of cost of properties from 90.9 percent in January to 80.9 percent, according to Canadian Real Estate Association.
Now the main question that comes to mind is, 'How to buy a house in Canada?' If you are planning to buy a home for the first time, you may be looking for a guide to familiarise you with the whole process. Well, look no more. Here is a 7 steps guide on the buying procedure in Canada.
Buy a Home in 7 Steps
The steps for buying a house are same for a condominium, a house and a townhouse. To make things simple, the examples here will focus on a fully detached house.
Step 1: Save the down payment
If you want to buy a house, first you'll need to save some deposit. In Canada you must deposit at least 5 percent of the price as a down payment, depending upon the price of the house. For houses costing from $500,000 to $1 million, you'll have to put down 5 percent of $500,000 and 10 percent of the remaining price. The deposit is at least 20% for the houses costing $1 million or more.
You are advised to save a larger down payment as submitting a larger amount will give you the following benefits:
- More equity in your house
- Lower loan payment
- Less amount of overall interest
Also, while saving your deposit money, keep in mind to save money for closing costs. It includes land transfer tax, lawyer fees, title insurance, and home inspection; and costs between 3 percent to 5 percent of the house's purchase price.
Step 2: Get Organized
It is best to get the finances and paperwork organised in advance. You are advised to lower your debts as it will have a positive impact on your debt service rates and your credit score.
A lot of paperwork is involved in the process of mortgaging a house. If you get everything ready in advance, you will have everything in your hands when you actually apply for a mortgage. Here is a checklist of all the documents required to apply for a mortgage:
• Current employment information
• Other sources of income like business or investments
• Savings and investment statements of the last 90 days
• In case you are planning to opt for the Home Buyer's Plan, proof of withdrawal from your RRSP
• If you are getting a financial gift from your family, ask for a letter stating it is not a loan
• A void cheque
• An inventory of all debts and assets
Step 3: Check for rebates and grants
Buying a house is already a very big expense. So make sure you are not making it more expensive than it has to be. Do your research to check for all the rebates and grants available for you
Step 4: Look around for a great rate
Do not settle for the first price they offer. Take help from a mortgage broker to shop around. Look around for the best mortgage rate and then go your dream house. For example if you are planning to buy a house in Brampton, your mortgage broker will make you fill an application and then he'll try to settle the deal with several different lenders. He'll then select the best offer with the lowest rate for you.
Step 5: Get a mortgage pre-approval
You also need to get pre-approved before you can buy a house. So once you have your down payment, documents and a mortgage broker, it is time for pre-approval. It is free and it does not make you bound to a particular lender, but it will give you the answer of following questions:
- How much can you spend on your house?
- How much monthly mortgage payment you can afford?
- What is the mortgage interest rate
Step 6: Find a home
Finally, the fun part of the process is here. It is time to go house hunting. You are all set to go for a house hunt with all your documentation, down payment, and maximum price in mind.
Here are some tips to help you:
• Prefer a real estate agent who specializes in the kind of houses or locality you desire
• Let your agent do all the talking if you are a first-time buyer
• Jot down the things you 'want' and 'do not want in your dream house
Step 7: Make an offer and seal the deal
Once you've selected the house, things will start moving rapidly. The process will begin with the submission of an offer to purchase. Once the offer is accepted by the seller, you'll be asked to pay a deposit. You will also have to arrange for a home inspection.
After all of it is settled, pay your down payment and get the title transferred in your name with the help of your real estate lawyer. The process in total will take 1-2 months.