How to Buy a House in Canada

If you’ve never owned a home, you probably don’t know how to buy a house in Canada. Buying a new home is a costly and complicated process that requires planning. There are things you must fulfill to ensure that you get the most out of your investment.

Canada’s real estate market is booming as many money-savvy millennials are buying their first homes. In this guide, we’ll show you where to start when you want to buy a house in Canada, whether it’s a townhouse, condo, or a fully-detached house.

Buying a House in Canada: Steps to Follow

Buying a house comes with many responsibilities, including paying the down payment, closing costs, upgrades, and repairs. Ask yourself if you’ll afford to pay for all the closing costs. It will be easier to get started when you have some money for a down payment.

Here are the steps to follow when buying a home in Canada

1.    Determine the Type of House You Need

The first and foremost thing to do is figure out a house that can fulfill your needs and lifestyle. How many rooms do you need? And where are you planning to buy the house? These questions will narrow down your search, helping you find what exactly you want.

Look for a house in a location with all the essential amenities like schools, healthcare centers, and established transportation systems. An excellent example of such places is Whitby, where builders like Paradise Developments feature affordable houses.

2.    Get a Down Payment

Do you have enough funds to pay for the down payment? If no, you should start saving for it now. The down payment will depend on the value of the house you plan to buy. In Canada, you’ll pay around 5-20 percent of your home’s value as a down payment.

For houses priced between $500,000 and $1 million, you’ll need to pay 5 percent of the first $500,000 and 10 percent of the remaining amount. If the home’s value is $1 million or above, you must pay a minimum down payment of 20 percent.

If your down payment is less than the required amount, you'll have to take out private mortgage insurance. That could mean extra expenses to your investment.

3.    Get All the Requirements Ready

The secret to successfully buy a new home is getting organized. As you save for the down payment, also get all the required paperwork and finances ready. Consider paying off your credit card debs to increase your credit score and negotiate for better terms.

Prepare the relevant documentation to fasten the mortgage approval process. Here are some of the documentation that most mortgagors will need.

  • Current employment details, such as pay stub, T4, or letter from employer
  • Other income sources such as investments and business income
  • Past 90 days’ savings and investments
  • Proof of withdrawal from an RRSP when using the Home Buyers’ Plan
  • Inventory of all your debts and assets, including cars and car loans

4.    Take Advantage of Grants and Rebates

Buying a home in Ontario is a costly venture that requires a lot of money. That's why you should check if there are any housing rebates or grants and take full advantage of the ones you’re eligible for. As a first-time homebuyer, you can consider these options.

  • Toronto’s Land Transfer Tax Rebate: Available for people buying a home in Ontario. You can receive a partial refund of the land transfer tax up to $4,475.
  • Home Buyers’ Plan: Allows you to withdraw up to $35,000 from your RRSP tax-free to get funds for your home’s down payment.
  • GST/HST New Housing Rebate: It’s the partial rebate on the Harmonized Sales Tax (HST) or Goods and Services Tax (GST) paid when buying your new home.
  • Home Buyers’ Amount: Refers to a non-refundable income tax credit of $5,000.

5.    Search for the Best Mortgages Rates

With the best mortgage rates, you can save thousands of dollars from your investment. That’s why you should shop around for the lowest rate available. If you don’t understand how to find the best rate, consider working with a mortgage broker to help you.

You’ll fill out a single application, which the mortgage broker will use to shop around to various lenders. They will return with the lowest rate possible. That's the most reliable and convenient way to get the best mortgage rate for your home purchase.

6.    Get Pre-approved for a Mortgage

If you are a serious homebuyer, you need to start by visiting the lender's office to get a mortgage pre-approval. Most home sellers will be more willing to negotiate prices if you have the pre-approval letter. Thankfully, you don't need to pay for the letter as it's free.

To get the pre-approval letter, you’ll have to provide proof of income and assets, good credit score, employment verification, and other relevant documentation. Here are some of the information you’ll find in a mortgage pre-approval letter.

  • Mortgage interest rate available for you
  • How much you can afford to buy a house
  • Your maximum monthly mortgage payment

7.    Find the Best House to Buy

With a mortgage pre-approval letter at hand, budget on the mind, and down payment, you can start house hunting. Research the real estate market in your preferred location to ensure that the house prices fall within your budget.

If you are a first-time homebuyer, find a reputable real estate agent who understands the market more than you do. Make sure you prepare a list of the “must-have” features to narrow down your search. That way, you’ll find a house that fulfills your needs.

8.    Make an Offer and Close the Deal

Once you find a house you want, send an offer to purchase it. If the home seller accepts the offer, pay a deposit, and get mortgage financing with your mortgage broker. Hire a home inspection professional to assess the property before you commit to it.

After inspecting the home, secure the mortgage financing, and make a down payment to transfer the title. Ensure you do that in front of a real estate lawyer to oversee the legal processes. After finishing everything, the real estate agent will hand over the keys.

Final Words

Buying a house in Canada may seem daunting if you are a first-time homebuyer. Since you've learnt the tips on how to buy a house in Canada, you'll quickly find a home that fits your lifestyle. Figure out your finances and select a home that's within your budget.

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