How to buy your first home in Canada

Buying a house is a very important decision. Not only because it is a great expense, but also because you are deciding what your home will be in the next few years.

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Buying a home is the dream of many and the reality of few and, although it is said to be a complicated process, there are effective ways that facilitate this transition to a new step in life.

Real estate continues to be a significant investment for many people and there are several elements that must go hand in hand to ensure that the overall process is successful.

That is why if you are a first buyer the services of a qualified real estate professional are very important. Nevertheless, this is the correct process to buying your first home in Canada

Find the right real estate agent

For the purchase process to be carried out correctly, it is of great importance to find a real estate agent who is honest, who is willing to listen to your needs, because this can be an invaluable resource during the entire home buying experience, the agent would play the role of a personal advisor and negotiator.

Have your down payment on hand

In Canada, you must deposit at least 5% of the home purchase price as a down payment, and for homes valued at $1 million or more, the minimum is 20%.

One of the most important steps in buying a home is having the down payment ready, and while the amount of the down payment is larger it generates benefits such as a lower monthly mortgage payment.

Verify Refunds and Grants

Taking into account that buying a home is expensive and even more so in Canada where some of its metropolitan areas have an overvalued real estate market, it is important to verify if you are eligible to receive discounts or subsidies that will make the process not more expensive than necessary. Some common programs available to first-time homebuyers are:

Home Buyer Plan: Withdraw up to $35,000 from your RRSP for your down payment on your home, tax-free

Toronto Land Transfer Tax Refund: If you are buying a home in Ontario, you can receive a partial Toronto land transfer tax refund of up to $4,475

Home Buyer Amount: A $5,000 non-refundable tax credit

GST / HST New Home Reimbursement: A partial refund from the GST or HST you paid on the cost of the new home

Compare prices

Finding the lowest mortgage rate could save you thousands of dollars in interest over the life of the mortgage; Check with different lenders and get the best deal and the lowest rate, this can be done through a mortgage broker.

Improve your credit history

For some people the words “credit history” sound scary because when the debt capacity is low or for some reason they have had problems paying the financial commitments on time, what usually happens is that the approval process is frustrated with the banking entities.

One of the most effective ways in which you can improve your credit history is by using the Micarro.ca platform, it will not only help you increase your debt capacity, but it will also help you build your credit quickly, safely, and effectively while driving the car of your dreams.

Organize your finances and paperwork

It is important to understand that not all debt is bad or contributes to impoverishment, the reality is that debt is a tool that plays a very important role in your debt ratios that the lender will use to determine how much to lend you, however, it is also important to understand that “The less debt you have, the more you can comfortably borrow for your mortgage.”

Have the house appraised

Before taking the final step, take some time and make sure the home is inspected and appraised, as failure to do so could result in the loss of thousands of dollars.

Make a financial plan

It is essential to establish your financial capacity to know how much you can afford, so, as a general rule, experts advise that the price of the property should not exceed two and a half times the salary.

Get a pre-approved home loan

Keep in mind that the pre-approval of the mortgage is free and at no time does it commit you to a single lender, but they will help you determine the maximum purchase price and choose the solution that best suits your capabilities.

Enlist the help of an estate attorney 

It doesn’t hurt for a real estate attorney to review any purchase offer before submitting it, they will perform a title search and check for outstanding property taxes and liens.

Steps for buying a home in Canada 

The above stated are all the factors you need to consider and put in place before and when buying your first home in Canada. Now that you know all that, below are the steps for actually buying a home. 

  • Figure out how much you can afford to spend 
  • Start looking for your new home in Canada
  • Make an offer on your new home in Canada
  • Formalizing the mortgage

Figure out how much you can afford to spend on a home in Canada

Begin by using one of the affordability calculating tools on the internet or the one from the Canada Mortgage and Housing Corporation (CMHC).

The CMHC is Canadian government-owned cooperation mandated to help Canadians through the home buying process, so the CMHC affordability calculator is a trustworthy research tool for new home buyers.

All you need to do is simply key in your financial information, and the CMHC affordability tool will ascertain the approximated maximum amount you can afford to spend on a home.

Just bear in mind that if you are planning to purchase a new home in Canada within two years of arrival, you’d likely have to pay a higher down payment than the regular 5%, so be sure to factor that in when using the affordability calculator.

Start looking for your new home in Canada

Immediately you get the scope of how much you can spend, you’re now officially ready to start looking for a home!

In the post-pandemic market, the majority of listings of real estate are online. Some of the top websites in Canada for searching for a new home include Realtor, Purple Brick, and Property Guys. 

Lots of new home buyers in Canada choose to work alongside a real estate agent when buying a home.

Real estate agents often have the in-depth industry knowledge and expertise that enables them to spot prospective problems with potential properties and to effectively carry out the negotiation process with sellers.

If you don’t possess lots of real estate knowledge, working alongside a real estate agent for all or some of the processes might be your best bet as earlier mentioned. However, don’t forget that you would need to pay the real estate agent a certain fee for their services rendered.

However, many homebuyers choose to go through the process without a real estate agent. But in cases where you feel confident in your knowledge of the industry, your ability to research and get the best options, and adequately negotiate on your own behalf, then you might not need a real estate agent. 

But before concluding that you know so much, ask yourself.

  • If you know the types of inspections that is required to be done prior to buying a home? 
  • If you able to adequately negotiate with a seller? 

Conclusively, ensure to weigh all the risks before home hunting without an agent.

One last thing is, Enjoy the hunt as it is your chance to look at homes and imagine all the many possibilities for your life in Canada. go and view prospective homes with your family and friends, and enjoy the experience of planning your future together.

Make an offer on your new home in Canada

Once you get that home you’re most interested in, then you’re ready to take the next step which is, making an official offer.

If you’re working alongside a real estate agent, they’ll be responsible for helping you to put together an official offer.

And if you’re doing this on your own, ensure to consult the CMHC guidelines on making an official offer for a property before doing so.

Don’t be disheartened if your first offer is rejected. Purchasing a property in Canada is highly competitive, especially in some areas. If you remain committed to the process sooner or later, you will find something.

Formalizing Mortgages 

Once an offer of yours has been accepted and you’ve successfully closed the deal, you’ll have to formalize your mortgage with a lender. 

We recommend that you work with HSBC Canada on your mortgage. You could also check out the HSBC mortgage program for newcomers to Canada to know if you qualify.

With the offer officially finalized, you’re set to move in and begin the next phase of your journey in Canada.

Also, don’t forget to meet and introduce yourself to your neighbours! It’s Canada, everyone has a unique story, and most people would be happy to share theirs and hear yours over a hot chocolate or a cold beer. Good luck!

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