how to buy a house in canada

Buying a house in Canada is a complicated process. However, it can break down into parts to help you understand clearly more about purchasing a house in Canada, whether you are an experienced or first-time buyer, these steps can help you walk through this process seamlessly and quickly.

The following guide will demonstrate the step-by-step guide to buying a home in Canada from calculating interest rate, mortgage rate, and down payment to the final step that you get your own key. Remember, hiring a real estate agent is the best saving you can get when you buy a house.

Owning a home is not like signing a car and taking your responsibility lightly. Owning a car is easier, you only have to worry about gas and auto money deductions when the bills come.
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As future homeowners, you should be ready to shoulder your responsibility to your house, it is all about financial ability, hidden fees, rent, moving costs, legal fees, furniture fees, house problems in both winter and summer, local areas, and the list goes on.

Down payment can seem like cash value. Commonly, the more down money (or cash) you pay prior to financing, the less monthly payment you pay for your house. Down payment varies in different scenarios, and for any first-time buyer, the down payment is 5% of the purchase price. Meaning you can pay less cash and save some for other investments. Rarely do people pay full price.

Having a down payment is a great step to getting your dream house. However; you should have an emergency fund when things happen, it is usually $10,000 to $20,000. Because there will always be hidden fees that you can not know unless you have the key in your hand.

As you have already known, owning a home is to pay a lot of bills and unexpected expenses related to repair and maintenance. A rule of thumb is your income must be triple the total monthly cost of your house for a single person to live worry-free. Usually, that's not the case because real-life scenarios vary.

There are some hidden fees including roof repair, which can cost you $5,000 to $15,00 or maybe higher based on region and the size of your houses, and labor fees, but the roof repairing cycle is around 30 years.

The second important thing is gas, hydro, and furnace, several houses include their furnace when you purchase, if not you have to install it when you take over the house. And there is more to tell, it is all about the maintenance costs.

That is why we have home inspectors inspect the house prior to signing any legal documents. A home inspector helps you detect house problems that commoner people struggle to discover.

The important thing is, your flow of income must be stable, and have a big saving to prepare for the worst. Calculating your income and others metrics when buying a house is a good preparation, mortgage payment calculator is your best buddy.

As when we settle down, we always aim for convenience and a friendly, safe neighborhood. It is important as that is where your children will grow up.

You should be looking for a place where it is near hospitals, schools, and other amenities like buses and amusement places. A thriving community is a sound place to settle down, as the living pace is always fast. Of course, you may not want to live in troublesome areas.

It depends on you if you can recognize the area that is on the growth, so that area will be worth more in the future, meaning the property value will go up higher than other areas in case you want to resell.

Furthermore, it is recommended that you often go to open-house shows in your targeted area to see what the realtor offers, you are not compelled to take the offer the second you walk out of the show, so not a big deal. The important thing in doing this is to get information about your targeted area, about the places, schools, price value for other houses if have any and the neighbors, and house condition.

A good real estate agent is the one that gets you a good house that comes with various advantages and tells you all the problems of the house to the best of their knowledge, not the one to entice you to get the house by any means.

To sum up, the house environment factors that you should be looking for are hospitals, schools, school buses, bus stations, distance from your workplaces, friendly and educated neighborhood, and entertainment services. If you can get the most out of the above conditions then your future home is worth living in.

Well, wise people always have a long-term vision because it makes their life easier. If you finance your house in 5 years or 30 years, those two scenarios are different because it's all related to legal documents, fines and fees, and extra costs if any.

To tell it briefly, when you do a short-term amortization period, you have to pay a lot of money out of your pocket and if you want to change house in the near future, you have to walk through the legal process again and some fines may be applied.

However, a long-term amortization period may get your interest higher, but at least they are paid gradually unlike the short-term plan where you pay a heavy down payment upfront.

Determining your down payment is not a time-consuming thing. But it is important as it will decide how much your interest rate and your monthly mortgage will be. In Canada, for many first-home buyers, the minimum down payment you must pay is 5%.

However, for a house value of $500,000 to $999,999, your down payment will be 5% plus 10% of the rest amount.

Meaning $500,000x5% = $25,000 plus 10% of the rest: 475,000x10% = $47,500. So the total down payment will be $72,500.

For houses over $1 million, the minimum down payment is 20% or more.

The difference between a small and large down payment makes a big impact on your home.
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With 5% down payment as you can see:

Amount of down payment: $25,000
Mortgage Insurance*: $19,000
Total Mortgage: $494,000
Interest Rate: 4.3%
Monthly Payment: $2,677

However, with 20% down payment:

Amount of down payment: $100,000
Mortgage Insurance*: None
Total Mortgage: $400,000
Interest Rate: 4.3%
Monthly Payment: $2,167

* Mortgage Insurance is the insurance for the bank in case you are unable to pay your monthly mortgage. Usually with 20% down mortgage insurance is not applied.

It is also a measurement to see whether you have the ability to finance the house.

Your emergency fund should be $20,000 to $30,000 to cover any legal fees, hidden fees when you walk into the house and live, furniture purchases, and closing costs. It is always good to have an emergency fund when you doing real estate transactions.

Here are some extra costs you need to know (the amount of cost based on different scenarios):

Land transfer tax: $7,720
Lawyer fees: $1,000
Title insurance: $500
Home inspection: $300 - $500
Appraisal fee: $300

When it comes to legal documents, you always want to prioritize them, as some documents may take a long time to process.

Here is the checklist:

1. Employment information such as T4, pay stubs, or letter of employment
2. Declaration sources of income.
3. Any investments or savings.
4. If you have any huge amount of cash, you must declare carefully with a detailed explanation of the source of it, with proof.
5. A void cheque
6. A declaration of all debts and income, it could be car loans or any loans, you must calculate all of the sources of income and outcome for the bank to produce the exact amount they can loan you.

It is always good when you have some financial support for your purchase. Buying a house is expensive but there are many programs and benefits you should know about.
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The government of Canada allows you to withdraw $35,000 from your RRSP account (tax-free) to pay the down payment.

Land transfer tax rebate: Applicable for Prince Edward Islands, BC, Ontario

In Manitobans : Up to 37,5%, continue to increase up to 50% in 2023.

First homebuyers: A non-refundable $5,000 income tax credit.

And there are many other benefits for homebuyers in different provinces on Government websites.

Different banks have different interest rates and programs. You should check and consider the offers that suit you the most.

By checking each bank or credit union's website you should have a clearer picture of how much money you can afford and areallowed to borrow.

A Pre-Approved is the statement from the bank that you are qualified to borrow an X amount of money based on your total income and outcome. They will let you know:

- How much you can afford to spend on a house?
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- How much your maximum monthly mortgage payment could be>
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- What mortgage interest rate is available for you?

For example: After carefully calculating your financial ability, the bank will issue you how much you can borrow, it could be $500,000 or $300,000 mortgage based on your ability.

Mortgage Approval is the approval after you have successfully targeted your house. You can take the Pre-Approval and go to the bank for them to make their decisions on whether it is qualified or unqualified as market time difference.

Meaning you get the Pre-approval with $500,000 house loan by the time the house price was high and the interest rate was low. However, after 2 months of house hunting, the number will be different, so the bank will reassess your financial ability. If you are qualified, they will let you borrow. If not, you have to run your numbers again.

Tips: Sometimes, the bank may do a home inspection to see the real value of the house, if it is over your financial ability, they will unqualify you.

The reason owing that if the house's real value is $300,000 but you buy it with $500,000, they are afraid you are unable to pay that price.

Moreover, if the bank wishes to sell the house in the future, they must sell at the price value of $300,000, making them lose money if they let you borrow in the first place.

It is important to know that before making any purchase, you must know when is the best time to buy a house. In order to not make any mistakes such as buying when you don't have the buying power or the rate is high that you actually didn't know.

After carefully reading and understanding all the legal documents, process and run your numbers and the ability on how much you can afford for your house. You go on house hunting!

- Find your market area and attend some open houses to know the value of the house in that area, the amenities, the style of the house, and the neighborhood itself.
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- Create a list of features for the house you want to move in. It should be in the interest of you and your future family, to make it as convenient and safe as possible.
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- Get a real estate agent in your targeted area, and ask them all the questions you have in mind. Because it is important for you to know all the details of your future house so you can gather the information and make the decision.

- Be prepared for any up trends or down trends in the market.

If you are in Winnipeg, you can use this app on your phone to locate your dream house: Go Agent

In this competitive market like the Canadian real estate market, you must act fast.

After you have contacted the home sellers, you make an offer to them. In most cases, you are not the only homebuyers, so you have to compete - bidding - usually, the one with the highest bid wins. After that, you make an offer, if your offer is approved by the seller, you have to pay a deposit to them.

Then, make an arrangement to finalize your mortgage financing through your mortgage officer or broker, and arrange for a home inspection.

The offer might be adjusted based on the value of the inspection. However, after making a deposit, you will secure your financing aid, with the help of a real estate lawyer, pay your down payment and transfer the title.

Once everything is dealt with, you will receive the keys from your real estate agent, and you will be officially the new owner of the house.

It is important for you in the first place to get the approval, as it will indicate how much money you can borrow in your financial ability. After that, you will have a clear understanding of what type of house, and house price you are recommended to target.

Another benefit when you get pre-approved is that you can lock in your interest rate for 90-120 days. Because the interest rate keeps raising in Canada, locking in an interest rate can help you save thousands of dollars.

Gathering information is the best preparation for you. You can ask your family members or friends for advice on the first time buying a house. They will give you some advice that can help you in the long run. Maybe any mistakes that they wish they would have known sooner. These are valuable lessons.

Getting a home appraisal will help you prevent overpaying and know the true value of the house.

For most people purchasing a home is the largest investment that they make; you do not want any surprises; as they can be costly.

As long as they asked for a home inspection contingency at the time they wrote the contract and followed the terms of the contract they can back out of the purchase should the inspection report uncover structural damage or issues with critical systems that would be too costly for the buyer to undertake.

When choosing your house, you may want to think about it in the long term way, choose a location that has the amenities you need such as close schools, close hospitals, easy transportation, a friendly neighborhood, and well-educated.

Another thing to point out is, when you choose your house, you should also consider the market you are targeting in, it is important. There are also price factors, and market trend factors, you can check about Winnipeg House Market 2022.

Choose a house that has few to minor problems, and is around 20-30 years old, as old houses have a lot of issues and hidden ones. Unless you are a house investor, once you have the key to your old house, you will have to spend extra maintenance and renovation cost for your house in order to live properly.

At the end of the day, they are professionals in this field and they can give you a lot of good advice and avoid many bad mistakes on your real estate journey. Having a good real estate agent is a sign that you can buy your house fast.
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You should do your own research when buying your first home. This article only helps you know more about the surface of the buying process and can not cover the depth of knowledge of the real estate industry.

The most important thing is you and your real estate agent are working together on getting you your dream house. Just make sure to prepare well in advance, save a large down payment, and ensure your financial house is in order before you take the plunge.

Apart from knowing how to buyouse in Canada, you must also know some home staging tips. Because when a house is difficult to quickly disappear from the market. It could be probably that the display of your house doesn't make your clients feel appealing or enticed.

It is important to understand and know all the numbers you have to pay after you close a deal on a house. Because after you signed your deal with the lenders. There are numerous costs after which you should add-on to your total purchase price of a house.

There are some common closing costs in manitoba which are legal fees, property tax, land transfer, and mortgage default insurance that you should know. On average, a $500,000 house in Manitoba has a closing cost of nearly $12,000.

The helps qualified first-time homebuyers to reduce their monthly mortgage payments without adding to their financial burdens
- 5% or 10% for a first-time buyer's purchase of a newly constructed home.
- 5% for a first-time buyer's purchase of a resale home.
- 5% for a first-time buyer's purchase of a new or resale mobile home.

You can claim up to $5,000 for the purchase of a qualifying home in the year if both of the following apply:

- You (or your spouse or common-law partner) acquired a qualifying home.
- You did not live in another home owned by you (or your spouse or common-law partner) in the year of the acquisition or in any of the four preceding years (first-time home buyer).

For more details and information, you can find them on the government websites.

Bottom Line

This article helps you understand the buying process in Canada, including a simple explanation for step by step home buying guide, the closing costs and procedures as well as legal perspectives.

At the end of the day, it is strongly recommended to hire a professional real estate agent to get this process goes smoothly as possible.