August 27th 2021
What You Need to Know as A First Time Home Buyer in Canada
By Lucas Samuels
Throughout our lives, we make plenty of major decisions that require extensive planning and preparation. There’s the selection of a career path, the decision to start a family, and the choice to live a healthier life — to name just a few. But there are none with more financial and lifestyle implications than the decision to buy your first home.
Between the massive number of documents, financial requirements and viewings, it’s easy to get overwhelmed. This is especially true in countries like Canada, where skyrocketing prices and demand have turned the real estate market into the nation’s major economic driver. As helpful as realtors, brokers, and real estate lawyers can be when walking you through this purchase, first time home buyers must still come to the table armed with information.
Below are some of the key things you should know when buying your first home in Canada.
What to know as a first time home buyer in Canada
Before you even begin contacting lenders, realtors, or looking through online brokerage sites, you’ll want to sit down and reflect honestly on your financial status, current lifestyle, and future goals to ensure you’re making the right decision. After taking this time to reflect and plan, you can begin going through the rest of the first time home buyer checklist to prepare yourself for the exciting (albeit sometimes stressful) process of purchasing your first home.
First time home buyer checklist
Various professional associations, real estate firms, and government bodies have these kinds of lists that contain key information to help guide you through the process. Here’s some of the important info a first time home buyer checklist provides:
Determine your readiness
One of the first questions you need to ask yourself as a potential first time home buyer in Canada is: Am I ready to own a home? This involves assessing your current lifestyle; future goals; and mental, physical, and financial capacity to maintain this sizable investment. This is also an important time for you to learn the upfront, carrying, and maintenance costs of owning a home.
A particularly important part of your initial homeownership assessment is an honest analysis of your financial situation. This includes everything from your job security and salary to your credit score to the amount of money you’ve saved for a down payment. Behavioural components are also an important part of your financial analysis.
Budgeting is not a strong suit for all first time buyers, and you aren’t immediately disqualified from consideration if you fall in that category. That said, it does help. If you routinely exhibit good fiscal behaviour like budgeting, not only will banks offer more favourable rates, but you’ll also be well-positioned to handle all associated costs.
Before moving on to step three, it’s also a good idea to meet with bank advisors and potential lenders to get an objective determination on your financial preparedness.
Before looking at potential homes, it’s always advisable that you secure funding through a mortgage pre-approval. A pre-approval lets you know how much money you’re authorized to receive from a bank or other lending institution if you want to purchase a home. This is also a good time for you to refresh yourself on the ins and outs of mortgages.
Before officially taking out a home line of credit, it’s also important that you plan how to manage your mortgage to become debt-free as soon as possible. Depending on the amount of money you have available for a downpayment, you may also need to get mortgage insurance from your lender.
Find the right home:
Now comes the most exciting part of the entire process: finding your first home! There are plenty of factors that go into determining your ideal first purchase, including the location, structure type, size, amenities, and lifestyle that it affords. Make sure you and your family discuss these attributes in advance to be more efficient during the house-hunting process.
Assembling a network of professionals is key to making the right property choice. Everyone knows they need to find a realtor and real estate lawyer to represent them. Still, there are multiple other certified experts providing services to make the home selection process easier. They include:
- Real estate brokers
- Insurance brokers
- Property appraisers
- Home inspectors
- Builders and contractors
Offers and closing
The Canadian real estate market is competitive, so naturally, the process of putting in an offer can be frustrating. But if you’re surrounded by a great team of professionals, you’ll have a much better chance of getting your foot in the door. Your realtor and a legal professional will help you navigate any bidding wars and can walk you through the closing process.
Once your offer has been accepted, your lending institution will help you finalize the mortgage so you can close the deal and finish the process of buying your first home in Canada!
The CMHC’s first time home buyer incentive
As you’re well aware, many of the popular real estate markets across Canada are costly and have a higher barrier to entry. Even multi-income buyer groups can struggle in these situations. To help address this issue, the Canadian Mortgage and Homeowners Corporation provides an incentive for first time home buyers in Canada. This eases the financial burden on those trying to get into the market and makes real estate more accessible to all Canadians.
The incentive comes in the form of a shared-equity mortgage with the Canadian Government. Depending on the type of property you’re looking for, it offers first time buyers:
- 5% on the purchase price for an existing home
- 5% or 10% on the purchase of a new build
- 5% on the purchase of a manufactured or mobile home
After 25 years, or whenever the property is sold, the first time buyer repays the incentive based on the home’s value at the time of reimbursement. It’s a small price to pay to reduce your down payment or cover other costs associated with buying your first home in Canada.
Some provincial and regional incentives may also apply to you as a first time home buyer in Canada, so reach out to your real estate experts to learn more!