Buying a home is vastly different than your average purchase, like groceries at your local supermarket. You have to do a lot of research, planning and saving before you can think about hunting for homes or making a down payment.
However, researching how to buy a house in Canada can be pretty time-consuming, especially if you're already busy with other aspects of your everyday life.
If you're looking for a quick, detailed guide to buying a property in Canada, you've come to the right place.
We've put together a step-by-step guide that can help you save for and find the perfect home for you and your family.
Continue reading to learn more about how to buy a house in Canada like a seasoned expert.
Seven steps to buying a house for the first time in Canada
Buying a home in Canada may seem like a distant goal if you haven't created a game plan.
But, with some time and research, anyone can learn how to find their dream property.
Feel free to use the following tips if you want to master the house buying process Canada:
Step #1 — Assess your price range
Many real estate experts feel that potential home buyers should aim to have monthly housing expenses equal to (or less than) 35% of their monthly income. Potential home buyers should include regular expenses like their utilities, mortgage, home insurance, etc., into this total.
Keeping your monthly housing expenses at 35% of your monthly income allows you to comfortably pay off your regular expenses while also giving you the flexibility to save for the future.
For instance, if your monthly housing expenses exceed 35%, you may be able to pay the bills, but you may struggle to buy groceries, make car payments or save for retirement.
This is something that you should keep in mind before you tackle the house buying process for the first time.
Step #2 — Start saving for a down payment
When you're buying a house the process usually starts with saving for a down payment. This takes a lot of time and patience, so do your best to put a portion of your monthly income away for the future.
As a rule of thumb, you should save up enough to make a 20% down payment on your home. Doing this gives you additional buying power and flexibility.
You can make a smaller down payment; however, most real estate experts highly discourage buyers from doing so. Making a small down payment generally leads to high mortgage rates and gives you less equity in the property.
Step #3 — Research home buying plans and incentives
In Canada, there are a number of programs and incentives for first-time homebuyers in Canada. Some examples include:
The First Time Home Buyer Incentive
The First Time Home Buyer Incentive covers 5% to 10% of your down payment the first time you purchase a property.
The Home Buyer's Plan
The Home Buyer's Plan (also referred to as HBP) allows first-time home buyers to withdraw a maximum of $35,000 (tax-free) from your Registered Retirement Savings Plan (RRSP).
Tax-Free Savings Account
A Tax-Free Savings Account (also commonly known as a TFSA) allows Canadians to deposit a set amount of funds (per year) and withdraw it (tax-free) at a later date. A Tax-Free Savings Account is a fantastic way for Canadians to save for a home, as they won't have to deal with taxes when they withdraw their savings.
Step #4 — Shop around with different mortgage lenders and brokers
You can shop for a mortgage in Canada by reaching out directly to lenders or by working with a brokerage.
Mortgage lenders (like credit unions, banks, etc.) lend the funds directly to the buyers. The only downside is that buyers have to reach out to each individual lender.
On the other hand, mortgage brokers work with buyers and lenders. Mortgage brokers help pair buyers with mortgage lenders, making the process quicker and easier for the buyer. This is similar to how an insurance brokerage, like Surex, helps policyholders compare insurance quotes from various companies in Canada.
Step #5 — Check out different neighbourhoods
Once all of the financial details have been taken care of, the fun begins! It's finally time to start checking out neighbourhoods in your price range.
Be sure to keep the following details in mind while driving or walking through neighbourhoods that you would like to move to:
- Are there stores within a reasonable walking or driving distance?
- What is the crime rate in the area?
- Are there schools nearby?
- Is the neighbourhood close to any special perks or amenities? (splash pads, playgrounds, walking trails, skateparks, etc.)
- Are there train tracks nearby?
- How busy are the roads in the neighbourhood?
- Are there multiple homes within your price range?
These are just a few of the questions you should ask yourself before making a decision about a potential neighbourhood.
Step #6 — House hunt
Once you've narrowed it down to a few neighbourhoods, it's time to start house hunting! During this step, you may want to team up with a real estate agent. Teaming up with a reputable real estate agent will make the home buying process much easier in the long run, as they can help you find the property of your dreams without breaking your budget.
Step #7 — Make an offer on your future home
After lots of saving, researching and house hunting, it's time to make an offer on your future home!
If your first offer is accepted immediately, then congratulations! You can start getting ready to move into your new home. However, if your first offer isn't accepted, don't worry! Buying a house is rarely an easy process, and it's not uncommon for buyers to make offers on several properties before getting accepted.
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Now that you know how to buy a home, it's time to start comparing home insurance quotes!
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