About half a million homes are sold in Canada every year. Will you be one of the next buyers? The question may be simple to answer for some, but your own decision will depend on a wide range of financial factors in your life. You should ask yourself:
- Do, or will, I have enough money to buy?
- Is my credit good enough for a loan?
- Am I ready for the ongoing costs of home ownership?
- Is home buying a better option than renting?
If the answer to these questions is yes, you're ready to start following the advice in this guide. Remember, buying a home is likely to be the biggest financial decision of your life, so the more professional advice you take to heart, the more likely you are to enjoy stable ownership going into the future.
Saving for a Down Payment
The national average home sale price was $506,000 as of October 2017, according to the Canadian Real Estate Association. With a minimum required down payment of 5%, you'll need to save about $25,000 before you'll be able to purchase a home. Credit Canada has a detailed guide on how to save up for a down payment. In short, you'll need to set a financial goal and stick to it by finding savings wherever available, cutting back on expenses and finding additional income.
Building and Maintaining Good Credit
Solid credit often can translate to lower interest rates on loans, lower monthly payments, and lower overall home buying costs. If your credit isn't great, take some time to make improvements before applying for a loan. Excessive debt can be eliminated in just a few short years with a debt consolidation program, and you can learn to build and maintain great credit through our professional credit counselling. Examine your credit report carefully before going to the bank to make sure there are no errors.
Getting Pre-Approval for a Loan
Having pre-approval for a home loan gives you a huge advantage over other buyers when bidding on a property. While pre-approval doesn't guarantee a specific loan amount, sellers will know your chances of securing funds for your home purchase are greater than other buyers who lack that status. To get pre-approval, you'll need to show your lender:
- Proof of income
- Proof of assets
- Good credit (learn more from CMHC)
- Employment verification
According to polling from Genworth and Environics, 62% of first-time home loans were obtained by spouses or partners, so don't hesitate to go into a home purchase with your significant other. Not only are you more likely to get pre-approval, but your rates and overall financial burden will be lower individually.
Hiring a Real Estate Agent
Not everyone hires a real estate agent when buying a home, but these professionals usually have a lot of detailed information about local markets and real estate laws that are a great help to buyers. The Balance has a list of 10 questions you should ask a real estate agent before hiring. These questions include:
- What is your experience?
- How are you different from your competitors?
- What do you charge?
- Do you offer any kind of guarantee?
Any agent you hire should make you feel confident and secure going into the home buying process. If an agent is unable to provide the information you need, you should probably look elsewhere.
Finding the Right Property
Now that your finances are in order and you have an agent you can trust, it's time to find the right property to buy. According to the Canada Mortgage and Housing Corporation, there are four key factors to choosing a home: location, size, special features, and lifestyle. Once you decide on the type and location of the home you want, you can start researching through a variety of channels: social media, newspapers, real estate websites, new developments, and any places your real estate agent suggests. The best advice here is to look at as many homes as possible before making a decision. Your dream property may be the next one in line.
Budgeting Ahead for Ongoing Expenses
Once you've found the right home and started the home buying closing process, you'll need to start thinking about the new budget you'll need as a homeowner. Remember, your mortgage is only one aspect of your ownership expense. Even if your insurance and property taxes are rolled into one monthly payment, you'll also need to consider maintenance and repairs. You can create a detailed budget with these expenses through a custom spreadsheet or resources like our free budget worksheet.
By following the advice in this guide, you're much more likely to have a smooth buying experience than if you try to do it alone. Contact Credit Canada today to learn more about budgeting, saving, credit, and the rest of the home buying process.