Buying your first home can be an emotional experience. Indeed, homeownership is thrilling, but can also be stressful for home buyers, especially first-timers. It is essential to know what you want and what you can afford during this process. Having an experienced real estate agent as your guide can make this experience easier and smoother for you.
That said, home buying may feel like a rollercoaster ride as you deal with the highs and lows of finding the perfect home, but then realizing you can’t afford it, and other such events. However, the journey will be worth it as you are bound to find the right house in the end.
Here are the major steps you are likely to go through when buying your first home in Canada:
Step 1: Determine What You Can Afford
First things first, you need to have a clear idea about how much you can afford to spend on the house. For this, you need to have a thorough review of your savings, spending, and luxuries. Create a monthly budget and be realistic.
Determine how much you would be able to spare every month for the mortgage payment as this will give you an idea of the mortgage rate you would want to get.
The Canada Mortgage and Housing Corporation (CMHC) indicates that your monthly household costs, including utilities and mortgage payments, should not exceed more than 30% of your total monthly income. Moreover, your overall debt load for the month, including mortgage payments and others, should not cross 40% of your total monthly income.
With a clear budget in mind, you will be able to narrow down the houses for sale that meet your financial requirements. This will also make it easier for you to not overspend on your house, which could make things difficult for you in the future.
Step 2: Pre-Qualify for Mortgage
There are various kinds of mortgages you can select from. If you can’t get 20% down payment for a typical mortgage, you can still aim for a high ratio mortgage, along with default insurance, which enables small down payment.
Whichever you select, it is highly recommended that you get pre-approved for the mortgage before you start house hunting. This simply means consulting your bank, submitting all the necessary documentation and getting a rough estimate of the amount of loan you can get.
However, it is crucial to understand that if you are getting pre-approved for a high mortgage amount, this doesn’t mean you have to use the entire amount. Keep your budget in mind.
Step 3: Hire a Real Estate Agent
Having a real estate agent by your side means they will shortlist houses for you, based on your interests, goals, and financial requirements. Real estate agents are well-aware of the areas, neighbourhoods, the type of houses, as well as the houses that can meet your budget and other needs.
Opt for a real estate agent you are comfortable with. It is important to be able to properly share with them the things you are looking for in your future house. Moreover, buying a house for the first time can be highly stressful, which is why having a professional help you out can be a huge advantage.
Step 4: Consult a Lawyer
Consulting a lawyer is another important step in ensuring everything goes smoothly. You will need a real estate lawyer to go through the purchase offer, as well as checking up on the outstanding taxes and other legalities that come with the house purchase.
Step 5: Start Looking
Now begins the process of house hunting. Keep in mind that this will be a long process. It is ideal to not just look at the house that meets most of your requirements, but also the ones that suit some of your requirements. It is possible that you might find the latter house more suitable for you and your family.
You should also create a wish list and categorize the must-include things in the house, things that would be great to have but you can do without. Moreover, be sure to consider your future lifestyle and plans as well. Make sure to check out the neighbourhood and nearby facilities.
A house hunting checklist is another great idea to keep a tab on the houses you viewed, which things the house had that you loved, liked, or disliked, things you feel need changing, as well as any other comments. This will help you in further short-listing the houses, and deciding which one you want.
Step 6: Make Your Offer
Once you have started short-listing the houses you viewed, you will definitely have a clear idea of one that you think is best for your family. It is now time to make your offer. Discuss the value of the house with your real estate agent to help determine the best offer.
Make sure that when you make the offer, you include the fact that you would want to get the home inspected by a professional and this offer might change in case any issue is found. This is also where your lawyer can help you in preparing a stronger offer.
Step 7: Get the Home Inspected
Once the seller accepts your offer, you need to get the home inspected before you finalize the deal. A professional home inspector will carefully examine the entire house to ensure it is in good condition, as stated by the seller. This home inspection can also identify areas that may need improvements or repairs before you move in.
Step 8: Get Things Fixed
In case the home inspector highlights things that need repair, you can further discuss this with your real estate agent and lawyer to determine whether or not you want to change or alter your offer. In such situations, either the seller volunteers to get the issues fixed or the cost of repairs are deducted from the final offer.
Step 9: Finalize and Close the Deal
When you and the seller are satisfied with the offer, it is time to deal with all the paperwork. This can prove tedious and a bit confusing, which is why it is best to contact your real estate agent, your lawyer, as well as your lenders to finalize the deal, including mortgage approval, insurance, title search, and more.
Step 10: Closing Day
There is plenty you will have to do before the closing day, such as lining up services and utilities like internet, cable, and phone, giving notice to your landlord, packing up your things, hiring a moving company, and so much more. Once the payment has been finalized and the paperwork completed, you will receive the keys and deeds on the closing day. Now, you are officially and legally a homeowner!
Purchasing a home is a major investment of not just money, but also your effort and time. Be sure to dive into this process with an open mind. Work with your real estate agent (ME) to ensure you find the house that fits your needs.
Buying your first home doesn’t necessarily mean it has to be your dream home. Instead, it should be a home that is suitable for you and your family as per your needs and requirements, and especially within your budget.
Who knows, you can transform that very house into your dream home with renovations, updates, and priceless memories!