What You Will Find In This Guide:
- How to Get Started Buying a Home
- Top 10 Qualities to Consider When Buying a Home
- Special Considerations When Buying a Condo
- Four Reasons You Probably Need a Buyer’s Agent
- The Home Buying Process in Five Steps
- Costs to Anticipate While Buying a Home
- Start Your Process of Buying a Home in Canada Today
Buying a home means not only making a really tough decision, but also following through with a complicated and often drawn-out process. Since it can be easy to feel lost along the way, we have provided this handy guide to buying a home in Canada. It may not cover every single detail, but it can provide enough guidance to give you confidence throughout the process.
Should you have any questions, you can also contact me to make sure that everything is understood and crystal clear. One of my favorite aspects of this career is helping people and answering their questions, so do not hesitate to seek my help with any and all issues on home buying.
How to Get Started Buying a Home
Your first few moments during the home buying process can be both exciting and kind of frightening. After all, every possibility in the universe can feel open to you.
Narrowing your options from “everything in the universe” down to a few top choices can be relatively easy, though. You must first consider the general qualities of a home you would not only enjoy living in, but feel rewarded to call yourself its owner.
You must also establish firm financial baselines for homes that are or are not realistic for your budget. Remember that home expenses go beyond mortgages and can include property taxes, closing costs, strata fees, maintenance and other expenses that often make a “cheap” house quite expensive, and sometimes vice-versa. Therefore, getting started buying a home means setting realistic expectations financially but wild expectations feature-wise in order to leave nothing unconsidered.
Imagining the “Perfect” Home
To get started with narrowing down the home features you want, begin to imagine your ideal lifestyle in the city or region of choice. Consider things like:
- How long your commute will be, and what alternative transit options you may have
- What schools your children would attend, if you had them
- How much maintenance and upkeep you are willing to deal with
- How your living situation might change if your family grows
- How you intend to use the space of a home, which can dictate square footage needs
- Whether you intend to eventually resell the house and within what time frame
- Whether you are willing to make sacrifices to make your mortgage payments fit within your income
- What sort of businesses, shops and services you care about most and how far you are willing to walk or drive to reach them
- What your ideal situation would look like aesthetically, such as a tree-shaded lot versus a condo overlooking the city
These general qualities can help you hone your “wish list” of specific home features down to certain categories.
Naturally, very few houses will fit this perfect ideal, so you can also begin to prioritize which traits matter most or how you are willing to sacrifice some needs/wants in favor of others. For instance, maybe walking to downtown is not as important as a home with a spare bedroom?
Setting a Realistic Budget
When setting a budget, one action will help you more than anything else: getting pre-approved for a mortgage. The process of pre-approval typically involves arranging proof of income and weighing it against expenses from account statements. Tax returns are also often scrutinized, meaning that most financial aspects of your life are considered before setting a realistic budget for yourself.
Not every lender will go through these lengths, but most of them will require you to take an introspective look at your own personal finances. During this time, you take an introspective look at your finances that can help reveal a monthly budget that includes mortgage payments in addition to amortized estimates for property taxes and upkeep.
With this monthly budget in hand, you can create a realistic price range for your home purchase, hopefully with a small amount of possible wiggle room. Note that the more thoroughly you go through this personal budget audit on behalf of yourself or a pre-approval agent, the less likely you are to be disappointed when applying for the actual mortgage down the line.
Top 10 Qualities to Consider When Buying a Home
A home should be much more than a set of four walls. To make sure that your home has everything you need inside and out, consider each and every one of these features, in rough order of importance:
- The home’s condition — Homes that have been neglected tell clear tales. Look for damage to roof shingles and siding as well as signs of foundational stress or insect damage. Inside, look at the condition of flooring, appliances, pipes and other warning signs, like water damage spots or wall cracks indicating a settling foundation. Issues like these can often be fixed, but at a high price.
- The home’s value relative to the neighborhood — Like it or not, neighbors and development affect home values. A home value unusually out of line with others can either indicate undisclosed problems or a market anomaly that could soon be corrected.
- The bare minimum of square footage, bedrooms and functional spaces — Never settle for a home smaller than your bare minimum needs without good cause. Keep in mind that some homes do make more efficient use of square footage than others, though.
- Access to necessary goods, services and businesses — If your closest grocery store or quality school is an hour away or minutes away, consider how that might affect your lifestyle.
- Room sizes and home layout — The size of the master bedroom, additional bedrooms, kitchen, bathrooms, living room and more all affect how you can use the home. Layout can have a large influence, too, such as a gorgeous dining room that never gets used because it lies in a distant corner of the home or a home office space that is perfect because it sits far away from the busy street.
- Desirable features — Whether they are present or can be affordably added, must-haves like a walk-in closet, two-car garage, or ample counter space can be difficult to replace with equivalent incentives.
- Nice-to-have vs. don’t-need — Unexpected benefits like granite counters or a patio spa carry added upkeep chores, so ensure that anything you don’t absolutely need won’t turn into a burden rather than a boon.
- Area zoning laws, bylaws and other restrictions — Depending on where you live and whether you have a homeowner’s association (strata), you may be restricted from making renovations or using your property as you see fit.
- Lawn size and condition — Homes with lawns have added appeal but also added maintenance. Ensure your yard offers the space you need without being unmanageable.
- Home aesthetic — Aesthetic matters in terms of not just how much you appreciate your home but also in terms of functionality. For instance, a home with a south facing exterior might not only have a great look in the morning but also reduce heating bills during the winter.
Special Considerations When Buying a Condo
Buying a condominium mirrors the process of selecting a home in many ways, save for these important exceptions:
- Condo stratas often have tighter restrictions on things like pets, renting out your property and making renovations. Ensure that these restrictions won’t affect your intended lifestyle.
- Stratas also have a responsibility for upkeep of common areas. Examine the typical fees, expenses and maintenance schedules for these areas, including any possible major renovations and “special assessments” on the radar.
- Stratas often have their own idiomatic way of operating, so review recent meeting minutes or sit in on a meeting to see if they fit your values.
Four Reasons You Probably Need a Buyer’s Agent
With free access to home listings online, many aspiring home buyers may wonder if a buyer’s agent can add value to the home buying process. The answer is that they unequivocally can! Here are four reasons that a buyer’s agent can benefit you during the home searching process and why they can prove invaluable to buyers:
- Many home sellers will have seller’s agents, who will do everything they can to convince you of a purchase while trying to obtain the highest ethical price. Buyer’s agents negotiate with seller’s agents to ensure that the stakes are even while providing information to the buyer that a seller’s agent would downplay or possibly not disclose.
- Buyer’s agents have intimate knowledge of their local area, helping steer you towards listings that fit your criteria for the home and neighborhood while steering you away from problematic listings and areas.
- Buyer’s agents guide you through the process of finding a mortgage, negotiating your offer, closing and more.
- Buyer’s agents provide their services to you essentially free of charge! They only take a percentage of the final sales price, which comes from the seller.
The Home Buying Process in 5 Steps
1. Searching for Your Home
Your buyer’s agent will arrange home viewings through sellers and other agencies. They can walk you through the home and help point out desirable features or potential issues. You may also find yourself attending open houses or meetings with representatives of condo boards or new home developers.
During this process, you may see some homes you hate and ones you love but likely cannot afford. This is okay! Finding out what you do not want often helps narrow down what you do, so every home showing is a learning opportunity.
2. Investigating Your Top Choices
After viewing many homes, you will begin to create a shortlist of the ones with the qualities you desire most. Often, each home will excel in one area while coming up a bit short in others, requiring you to consider compromises or potential budget adjustments. Remember that price is still open to negotiation at this point, though, and you still do not have all of the information you need to make a final decision.
For this reason, you will want to view homes again and ask detailed questions before making an offer.
3. Making a Conditional Offer
Once you are absolutely certain you have found a house you would like to own, you can make an offer to the seller. How much your offer differs from the asking price depends on a variety of factors, including the desirability of the home, its estimated market value, the tendencies of the seller and their agent, the tactics you use as a buyer and the conditions of your offer.
Note that your offer absolutely should have conditions attached to it. These conditions typically include the following:
- Home inspection results — A home inspection is an absolute must for almost 100% of home purchases. Conditional offers often allow buyers to back out if the home inspection reveals something troubling or if the seller is unwilling to account for smaller issues by fixing them or lowering the asking price.
- Appraisal results — A home appraisal can not only reveal a home being sold above fair market value, it can also affect the ability of the buyer to secure a mortgage in full should the home be overvalued.
- Ability to obtain financing — If the buyer cannot get approval for a mortgage, they should be able to back out of the offer
- Property disclosure statement — A seller should be required to make full disclosure of everything they know regarding the property, including known or potential defects. A buyer can consent to an offer knowing these disclosures or cancel the contract in light of them.
- Title search and property survey — A title search checks for issues with the title, such as any liens or competing claims to the property. Similarly, a property survey ensures the buyer is buying everything they expected to.
The home seller has the right to accept the offer, reject it, or make a counter offer with their own conditions. If a buyer receives a counter offer, they have the same options, including making a counteroffer of their own.
4. Creating a Contract — Key Dates
Once the offer is accepted, the buyer and seller will agree to a contract containing the terms of the offer. This contract will include several crucial dates on it:
- Subject removal date — After this date, the “subjects” or conditional terms of the offer are void and you are legally obligated to move forward with the purchase
- Completion date — This date signifies the legal transfer of ownership to you from the previous owner, although it frequently differs from the date the new owner moves in
- Adjustment date — On this date, a lawyer or notary will “adjust” the home purchase costs to account for expenses split between the buyer and seller, such as property taxes, fees already paid for and other line items
- Possession date — Possession date is the official moment when closing is completed and keys are transferred to the new owner. It typically falls on the same day as the adjustment date and 1-3 days after the completion date
Closing involves having a lawyer or notary perform a title transfer while accounting for any closing fees assessed as a result of the transaction. Typical closing fees, which will be outlined in greater detail below, include a property transfer tax, legal fees, filing fees, title insurance, adjustments, disbursements and more.
In total, expect closing fees to account for 1.5% to 2% of the final purchase price.
Your mortgage will also often be signed during or just before closing in order to secure the purchase in full.
Costs to Anticipate While Buying a Home
- Appraisal ≈ $300 — Assesses the value of the home based on comparable properties in the area and features like square footage, often required by lenders prior to mortgage approval
- Survey ≈ $400 — Detached homes with land may necessitate a boundary survey to ensure that all the property is accounted for in the deed
- Home inspection ≈ $500-$750 — Home inspections can reveal critical flaws about a home that would greatly affect the buyer’s willingness to pay
- Legal fees ≈ $800-$1,200 — Filing property transfer papers requires extensive legal knowledge as well as time and paperwork fees, all of which your closing
attorney or notary will bill you for
- Property Transfer Tax (PTT) ≈ 2% of the home price — Home purchases require payment of a property transfer tax, which comes out to 1% of the first $200,000 spent on the home followed by an additional 2% from $200,000 to $2,000,000, and 3% above $2,000,000 (see PPT costs for exact definitions). First time home buyers may be exempt from PTT if they can meet certain conditions, including a maximum purchase price on a sliding scale up to $475,000
- Homeowner’s Insurance ≈ $500-$3,000 annually — Mortgage lenders require homeowners insurance, but even if they didn’t it makes sense to protect your investment
- Real estate agent fees ≈ $0 — Most sellers pay for the buyer’s agent fees unless negotiated otherwise
- Other fees including moving costs, utility connection fees, strata initiation fees and any immediate repairs or renovations you want to make
Start Your Process of Buying a Home Today
I may consider this your “ultimate guide” to buying a home in Canada, but it could never possibly be 100% complete. Let me help you from the start of your home purchase journey until the very finish so that you can find the perfect home you need at a price you will love and without any unnecessary headaches along the way.
Take a look at my local home listings or contact me to start purchasing a home for you and your family today!