How to Buy a House in Canada: Answering Your Questions

Posted on February 9, 2021

If you’re looking for tips on how to buy a house in Canada, you’ve come to the right place. We’ll go over the basic steps for buying a home as well as tips to help you along the way.

From what questions to ask to how to calculate your affordability, we’ve rounded up everything you need to know about the home buying process. Think of this as your go-to guide for buying your next home.

Am I Ready to Buy a House?

When you’re looking to buy a home, you need to consider if you’re ready to buy a home. Owning a home is a big financial responsibility. For many people, your home is the biggest asset you have.

Before you take the leap into becoming a homeowner, ask yourself a few important questions. First, you want to make sure you’re ready financially. 

You want to ensure you have enough for moving expenses, closing costs, and down payment. You also need to make sure you have enough income coming in to support a monthly mortgage payment. If you feel confident about your financial situation, you’re on the right track.

How is the Local Market?

You’ll also want to consider the housing market in Canada. Take a look at homes that have recently sold in the area and cities you’re looking at. You want to make sure the market you like is within your budget.

Looking at the housing market will also help you gauge how fast you need to move. If houses are under contract the same day they go on the market, you know you’re in a hot area. If homes take longer to sell, you’ll have some more time.

This is also essential for resale purposes. If you’re looking to buy a home, fix it up, and sell it after five years, you want to make sure you’re in an area that will support that. Not all homes increase in value within the first couple of years.

If you’re wondering how to buy a house in Ontario, for example, you’ll want to enlist the help of a local real estate agent who understands the market there. If you don't currently live in Canada, getting a local real estate agent to help you relocate or purchase a second home is critical. 

Am I Ready to Settle Down?

One of the biggest things you should consider is whether or not you’re ready to settle down. If you are ready to become a new or second homeowner, this means you’re a little more tethered to a certain area.

While you can travel and do the things you love, you’ll have a house to look after and take care of. Your house payment might also change your lifestyle. If you’re stretching yourself too thin, you’ll need to be mindful of your budget.

Steps To Buying a House in Ontario and Beyond

To help you on your journey to homeownership, we’ve rounded up a few basic steps to follow. Whether you’re buying a house in Canada for the first time or the 100th, these tips will break down the most important steps.

Step 1: Saving for a Down Payment

If you’re considering buying a home, it’s time to start saving for a down payment. The amount you need to save will vary greatly from person to person. Let’s say you only plan on living in this home for three years. Your down payment might be a lot less than someone who wants to stay in the home for thirty years.

If you’re planning on renovating a home, it might make sense to keep some money back instead of putting it all down. The bottom line is this number will be unique to you.

No matter which route you go, saving for a down payment will take time. You’ll also need to factor in moving expenses and closing costs. If you don’t have a lot saved, don’t stress, there is no time like the present to start.

Make saving as automatic as possible. Use your bank’s website to set up automatic transfers from your checking account to your savings account.

You’ll also want to take a look at your budget to see where you can funnel some more money. Ask yourself a lot of hard questions about priorities and what you spend your money on. What some folks do is not only save a percentage of their pay cheques, but they save any additional commissions and bonuses as well.

Step 2: Get Your Finances Together

When you’re coming up with a savings plan, you’ll also want to get your finances in order. This means writing out all your expenses, bills, and income. If you have more money going out than in, it’s time to fix this.

Sometimes writing it all out is eye-opening. You may not realize how much you spend on dining at restaurants. You could also find you currently subscribe to five music streaming services you haven’t used in years.

Make a list of anything you’d like to cut, cancel, or shift. If cutting things in your budget is difficult, try to remember what you’re gaining. Cancelling unused subscriptions and memberships will feel great. Those extra monthly savings could add up to half a month’s mortgage.

Writing out a budget will also help you see where all your money is going. A $5 a day cup of coffee actually adds up to $1,825 a year. That could be an entire mortgage payment for a lot of people.

Step 3: Figure Out How Much You Can Afford

Once your finances are all laid out, you’ll have a better idea of what you can afford. Affordability and what you qualify for are two very different numbers. A general rule of thumb is that your housing expenses shouldn’t exceed more than 30% of your income.

You’ll also want to consider any improvements you’d like to make. If you’re looking at an expensive home in Ontario, that needs a little tender love and care, factor in some money for renovations.

This 30% rule also includes any assessment dues and insurance. If you are approved for a number, consider going a little lower to make sure you have plenty of wiggle room each month. The more disposable income you have each month, the more you’ll have for things such as investing, retirement and saving for an emergency.

Step 4: Get Qualified for a Mortgage

Once you have a ballpark figure of what you can afford monthly, it’s nice to compare it to a pre-qualification. Your lender will run your credit and assess your income and expenses.

Once they factor these numbers in, they will give you a general idea of what mortgage you’re qualified for. This pre-qualification is what your realtor will use to determine what houses to show you.

When you make an offer, you’ll also want to show your pre-qualification letter to prove you’re a serious buyer. Homeowners want to see you’re a qualified buyer who is able to come through with the financing on the home.

If you prefer doing your shopping online, we recommend giving Breezeful a try. Breezeful is a digital mortgage broker that allows you to search 30+ lenders to find the most competitive rates. Through Breezeful’s online portal, you can easily and quickly apply for a mortgage, upload necessary documents, and track your approval in real time.

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Step 5: Make Your Home Wish List

Now that you have your budget and pre-qualification, it’s time to make your wish list. While you might have had five bedrooms on your wish list before, now that you see what you can afford, it’s ok if this number goes down to three.

Think about your must-haves and what is most important to you, even on a small budget. While every house might not have what you’re looking for, there are always changes you can make down the road.

Keep in mind that the location and the size of your lot, are things you can’t change. You can always change the paint colour or tile flooring, but you can’t pick up a house and move it.

Write down your must-haves and share these with your realtor. You’ll also want to prioritize these. Maybe having a garage is a deal-breaker but having two or three bathrooms isn’t as important.

The type of home and lot size you prefer will also help you and your realtor determine which location is best for you. In certain areas, a detached house might be out of your price range.

In other cases, having outdoor space comes at a premium. The more you can narrow down, the easier your home search will be.

Step 6: Determine Your Home Location

Once your must have list is complete, it’s time to think about where you want to live. Having too large of a search area will make house-hunting difficult.

Be as specific as possible about the areas you want to be in. Think about if you want to be close to work or have your children go to a certain school. The location is one of the most important factors in buying a home.

Step 7: What Type of Home Would You Like?

Your budget and location will also determine the type of home you’re looking at. Think about whether or not you want a condominium or a detached home.

If you’re open to both, you’ll have more options. If you’re set on one over the other, share this with your realtor.

Step 8: Fixer-Upper or Move-In Ready?

One big factor to consider is whether you want a move-in ready home or a fixer-upper. If your budget is tight and you’re looking in an expensive area in Ontario, a home that needs repairs might be your best bet.

A home that needs work will cost less upfront. Your monthly payments will also be lower. This allows you to save more each month to put towards renovations.

If renovating is out of the question, you’ll only want to look at fully updated homes. This will cost more, but you won’t have any surprise costs come up or long construction delays to deal with.

Step 9: Get Connected with a Realtor

Finding a realtor is an important step in the home buying process. This person should be someone you like and trust. You’ll be spending a lot of time together over the course of a few months.

When you meet your realtor, they will want to know your budget, how much you’re qualified for, and what type of home you’d like. They will also need your must-have wish list and what areas you’re considering.

Step 10: Start House Hunting

The last step in the home buying process is finding your new home and striking a deal. Once you make an offer and it gets accepted, you’ll be well on your way to becoming a homeowner.

The closing process will include negotiations about the closing date, the final sales price, and any concessions either party needs to make. You’ll also secure your financing and determine your down payment.

Buy a House in Canada for Permanent Resident vs. Buying a House in Canada for Non-Residents

If you’re looking to buy a second home or a vacation property in Canada as a non-resident, you can do so as long as you comply with visitor immigration requirements. You do not need to be a citizen in Canada unless you plan to become a permanent resident.

Generally, you’ll need to provide income, tax returns, and proof of assets from the U.S. as well as Canada if applicable. You’ll also see larger down payment requirements.

How to Buy a House in Canada

If you’re wondering how to buy a house in Canada, look no further. This guide has all the basics covered including how to save for a mortgage and what questions you’ll want to ask yourself.

If you’re ready to take the next step into homeownership, fill out the contact form here. You’ll be contacted by a mortgage pro who will take all the pressure off of shopping for mortgages and interest rates.

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