New to Canada Home Buyer
Buying your first home in Canada as a new immigrant can be an exciting but daunting experience. Here’s a detailed explanation to help guide you through the process.
Step 1: Build Your Credit Score
Having a good credit score is essential to getting approved for a mortgage in Canada. As a new immigrant, you may not have a Canadian credit history, but you can start building your credit score by applying for a credit card (secured credit card may be required) or taking out a small loan. It’s important to make all payments on time and in full to build a good credit history. This takes some time so it’s important to start right away.
Step 2: Determine Your Eligibility
Before you begin the process of buying a home in Canada, it’s important to determine your eligibility. On January 1st 2023 the Canadian government implemented a foreign buyer ban, officially called, The Prohibition on the Purchase of Residential Property by Non-Canadians Act. The Act prevents non-Canadians and non-residents from buying real estate for a period of two years, though there are some exceptions outlined in the Regulations. If after reading the regulations of the Act you believe you’re eligible, or are still unsure it would be wise to speak with a mortgage broker or real estate lawyer to confirm your eligibility. We can recommend some qualified people to help you find the right information.
Step 3: Determine Your Budget
Once you know your eligibility, you’ll need to determine your budget. Consider your income, expenses, and any additional costs associated with buying a home, such as closing costs and property taxes. There are numerous online calculators to help give you a rough idea of what you can qualify for but you may also want to speak with a mortgage broker to help you determine a realistic budget. There are a number of banks and lenders who offer programs for New-to-Canada but a good qualified mortgage broker will be your best option. That said, shop around and speak to many brokers, banks and credit unions to find what’s best for you.
A good real estate agent can help put you in contact with the right people!
It’s also important to consider the amount of down payment you have but remember to subtract your closing costs. The biggest portion of your closing costs will be Land Transfer Tax which can be estimated with many online calculators. The remainder of your closing costs will be legal fees, title insurance, any adjustments and other somewhat minor fees.
Step 4: Choose a Real Estate Agent
Working with a real estate agent can make the home buying process much easier. Look for an agent who is knowledgeable about the local real estate market and has experience working with first-time buyers. Asking for referrals from friends or family members is a good start, but do some research online to find a reputable agent. Real estate agents are easy to come by and a profession that is very easy to get into. Most real estate agents are part-time and have very little experience. Just because someone is licensed does not mean they’re qualified. It would be in your best interest to do your research and find a full-time professional real estate agent that lives and works in the area you want to buy in. Look for Google and Facebook reviews, their searchability online and look them up on social media. If you can’t find much information it probably means they aren’t putting much effort into their real estate business.
Step 5: Start Your Home Search
Once you have your budget in place and a real estate agent to work with, you can start your home search. Be sure to consider factors like location, neighbourhood amenities, proximity to work and good schools. You can start with a wide “wish list” and then start narrowing down based on your budget and desired location. It’s important to have good and open communication with your real estate agent about what you like and don’t like. It’s also important that your real estate agent communicates with you about the realistic sale price of homes and how much of your “wish list” you can achieve.
Step 6: Get Pre-Approved for a Mortgage
While you’re working with your Realtor you should also be working with your mortgage broker or bank to get a true pre-approved. For a true pre-approval you’ll need your job letter, pay stubs, credit check, source of down payment and past tax statements, if applicable. Without all those you’re getting pre-qualified and that leaves a lot of room for errors which could be disastrous if there is missing or inaccurate information. This step will also ensure you’re shopping for homes you can actually qualify for and will avoid any heart ache or trouble down the road.
Step 7: Make an Offer
If you’ve found a home that you love, it’s time to make an offer. Your real estate agent can help you determine a fair price to offer and can guide you through the negotiation process. The real estate market is always changing so knowing what the true market value for a home is will ensure you don’t overpay for a home and ensure you don’t constantly lose out and have to pay way more later on. And with a pre-approval in-hand you’ll be able to negotiate a better price and terms on the purchase. In this step you’ll need to submit a written offer, which will include the price, closing date, and any conditions or contingencies that you want.
Step 8: Conduct a Home Inspection
Once your offer has been accepted, you might have had a home inspection condition. A home inspection is a thorough evaluation of the home’s condition, including the roof, foundation, electrical systems, plumbing and more. If any issues are found, you may be able to negotiate with the seller or choose to walk away from the deal within the agreed upon time from.
Choosing a home inspector should be as serious as choosing your Realtor. There are no regulating bodies for home inspectors, only some quick and easy courses. So your experience with home inspectors will vary greatly. If you’ve choses your Realtor right, there’s a good chance that they look for home inspectors who take just as much pride in their work. However some good questions to ask are how long the inspection takes, how long they’ve been in business, how many inspections they’ve done, what training they have and what tools they use. A good home inspector will have the latest high end tools like moisture meters and an infrared camera. The infrared camera can see behind walls by showing even the most minor temperature changes caused by water or poor insulation.
Step 9: Final Mortgage Approval (If applicable)
If you had a condition on financing approval then now is when you submit the property details to your lender. If you used a mortgage broker and got a true pre-approval then this step is very simple. Your real estate agent will send the lender the property details and since they already have all your employment and income information you only need to wait for official approval. This usually takes a few days but can happen in 1-2 days depending on your mortgage broker’s relationship with the lender.
Step 10: Waiving Conditions (if applicable)
Once the financing is approved and the home inspection has been completed, with any necessary repairs having been negotiated it’s time to waive conditions and firm up the deal. You’ll sign a form fulfilling your conditions which means all parties are committed to the purchase.
Step 11: Signing final documents
Approximately a week before your closing date you’ll need to sign a lot of paperwork with your real estate lawyer, including the mortgage agreement, title transfer, and insurance documents. You’ll also need to pay closing costs, which can include legal fees, land transfer taxes, and other fees.
Step 10: Move In
Congratulations! You’re now a homeowner. It’s time to move into your new home and start enjoying all the perks of homeownership. Be sure to change your address with all relevant parties, like your employer, banks, and utility providers.
It’s time to celebrate!!