There are many things that people don’t tell you when you are a first-time home buyer in Canada. This can cause home buyers to experience many challenges or unexpected delays. In this article, we will give you an in-depth glance at the home buying process, including estimated times, to help prepare you for buying a home.
Mortgage pre-approval
While you may want to start looking at houses immediately, the first step you should take is getting mortgage approval from a broker. This may not sound as exciting, but it’s incredibly useful. A mortgage broker will tell you how much you can afford to spend on a house based on your income, tax-free savings account, credit report, debt, and other factors. This will provide you with a budget and help you stay on track financially while looking for the right home for you.
It can take anywhere between several days to several weeks to be pre-approved. The it takes to get pre-approved for a mortgage depends on various factors including your credit report, current financial situation, and how busy your mortgage broker is.
It’s also important to remember that you are not required to take the first mortgage offered to you. Interest rates can differ between mortgage brokers. Shop around to find the best mortgage for you.
How to get pre-approved faster
Before visiting mortgage lenders, you should take the time to improve your credit score and pay off any outstanding debts that you have. This includes any credit cards or student debts. It may not be possible to pay them off entirely before wanting to buy a house, but even a payment or two could increase your chances of receiving a loan faster.
When looking at your credit history, lenders will want to see that you are a trustworthy person to lend money to. One of the best ways to increase your trustworthiness is to have a diverse financial portfolio and a . It is easy to diversify your portfolio by taking on other lines of credit like a credit card. Use your line of credit and then pay it off quickly to boost your credit score. This can help make the pre-approval process faster and it may also help you qualify for a mortgage with lower interest rates!
Hire a real estate agent
The next step in the home buying process is to hire a real estate agent. They’re industry professionals who can help guide you through buying your first home with their expert knowledge on real estate and the local housing market. In order to find the right realtor for you, ask your family and friends for any recommendations. Who have they hired in the past and how was their experience working with them? More often than not, your friends and family will have great advice on which realtor to hire and provide information on what costs to expect when hiring them.
Hiring a realtor can take some time depending on how long you spend considering your options and the length of time it takes for them to get back to you. We recommend starting this process early to find one that feels right for you. Typically, people will interview 2-3 realtors before going with the right one for them.
Go to open houses
This step is the by far most exciting part of buying a home. Potential buyers will browse properties for sale in Canada and determine if it is a place that they can imagine themselves living in. This period can last weeks or several months and shouldn’t be rushed. Buying a house is a big step in anyone’s life, but especially for those who have never bought a home before. Remember to stay true to both what you want in a property, and how much you can afford. Nevertheless, some compromise will be needed, otherwise, you may be looking for a new home forever!
Make an offer
After you have found a house you’ve decided you’d like to buy, it’s time to make an offer. An Offer to Purchase, if accepted, is a legally binding contract that establishes how the transaction will occur, including the names of the people involved, the property description, the unattached goods (appliances, etc.), and attached goods (fixtures, etc.) included in the home purchase. It also outlines the cost of the property.
Realtors will help their clients draw up their offer and ensure it is competitive based on the asking price and their current financial situation (including your mortgage loan). Some may even suggest that the clients write up a personal letter to include to the sellers if they are in a .
It has become increasingly popular amongst Canadian homebuyers to write a personal letter to the person they are looking to purchase a property from. This letter is included with the packaged offer. Most buyers choose to do this because they believe that the seller will connect more with them and help increase their chances of having their offer accepted.
An offer can be drawn up within hours and sent to the seller. It is then up to the seller to respond to the offer. Usually, a response could come in a matter of hours or days.
Close the deal
After an offer is accepted, buyers will immediately pay a deposit to their sellers as “good faith money.” This payment shows them that they are serious about buying the property. This deposit will typically be 1-2% of the purchase price and should be given in trust to the seller’s realtor.
Then, buyers and realtors will work together to complete the Agreement of Purchase conditions like receiving financing or an inspection. These conditions will need to be met during a 3-day timeframe.
Every buyer should schedule a home inspection for their new property. A home inspection allows buyers to gauge the surface level and hidden conditions of their new property. It could also identify any hidden issues that they didn’t know about at the time of offer. It is best to complete an inspection before making the purchase official in order to avoid any unforeseen costs or issues.
After the conditions of the offer are met, realtors will finalize the deal and buyers will need to meet with a real estate lawyer to process the paperwork, including your mortgage. At this point, a final closing day – also your move-in date! – will be assigned.
Lender underwriting and finalization
The final step to getting a mortgage in Canada is to undergo lender underwriting. This is when a lender takes your initial approval for a home loan and writes up your actual contract. Your lender uses the price of your home, credit history, income, and other information to draft up the details of your mortgage loan. This contract will include the interest rate that you have received and your mortgage payments.
This process could take anywhere from 1 day to 1 week. This will depend on how busy your lender is and whether they need to ask you for more documentation. After underwriting is complete, a lender will ask for several conditions to be met before it is approved and finalized.
Prepare for closing
Lawyers will help close your home by completing your conditional mortgage instructions. This is a list of things that needs to be completed before the mortgage is finalized and money is released. This will typically include any extra documentation that needs to be sent, including proof of insurance.
As part of the conditions of your loan, your mortgage lender will require you to obtain home insurance. This insurance protects both you and your lender from any fees that could be incurred due to damage or theft. Your lawyer will ask you to bring information about your policy to a pre-closing meeting to meet the requirements of your mortgage.
Mortgage default insurance is also required for anyone not paying a 20% down payment on their home. This insurance will compensate lenders if the borrower/buyer cannot make their payments. Thankfully, this is easy to obtain from most banks.
Anyone who received conditional approval for a home loan can expect to have 1-2 weeks to complete their conditions and receive verified approval.
Closing day
The closing date is the day that the title of your new home is officially transferred to you. After weeks or months of hard work, only paperwork sits between you and your new house. Any closing costs that weren’t included in your loan will also need to be paid on this day. This can include legal fees and property taxes like the land transfer tax.
Depending on where you are buying a house in Canada, land transfer tax may be included in your closing costs. This tax is a fee for changing the property title from the old owner’s name to your own. This tax differs in provinces, but first-time buyers in Ontario can enjoy paying less or even no tax at all thanks to the province’s .
Prepare to buy a home in Canada
Overall, first-time buyers in Canada can expect it to take 30 to 60 days to purchase a home. This depends on many factors, including their financial situation and how long it takes for them to find a house. But, it is possible to speed up the buying process with preliminary steps like:
- Improving your credit score and financial situation
- Making sure to get a mortgage pre-approval before
- Hiring a realtor early in the process
Emma Scott is a Content Writer with a passion for accessibility, the environment, and history. She currently works for Merged Media (a proud partner of CREW & REP) in Guelph, Ontario.
