Buying a house in Canada is a comprehensive process that involves several steps, including finding the right home, preparing your finances, and going through proper legal channels. Before you dive into a home purchase, it’s always a good idea to familiarize yourself with the home-buying process so you’re prepared for what’s to come.
If you’re wondering how to buy a house in Canada, read the following detailed guide.
Step 1. Get Pre-Approved For A Mortgage
Mortgage pre-approval is when a lender assesses your financial situation to decide how much they would be willing to lend you for a home purchase. The process involves reviewing your income, debts, and credit score. Once you’re pre-approved, you’ll know the maximum amount you can borrow, what your monthly payments may be, and the interest rate you qualify for.
Getting pre-approved is important for a few reasons:
- Find Out What You Can Afford — Pre-approval helps you understand how much you can afford, so you can focus on homes that fit within your price range.
- Show Sellers That You’re Serious — Being pre-approved shows sellers that you’re a serious and qualified buyer, which can give you a leg up on the competition.
- Speed Up Final Mortgage Approval — Mortgage pre-approval can help speed up the final mortgage approval process once you’ve made an offer and the seller accepts it. Since much of your financial assessment has already been done, the process can move along quickly.
Learn more: How To Get Pre-approved For A Mortgage
Step 2. Find A Real Estate Agent And Search For Homes
Your next step is to hire a real estate agent to help you find your new home. Agents are helpful for several reasons:
- Listing Access — Real estate agents have access to MLS listings and can show you properties that may not even be listed to the public yet.
- Knowledge And Experience — Agents understand the current market and are familiar with local neighbourhoods to help you find the right home that checks all the boxes.
- Negotiation Skills — Agents have experience handling negotiations, which can increase the odds that you get the best price.
- Handle Paperwork — There is a lot of paperwork involved in buying a home, and your agent can handle all that for you, making the process easier and less stressful.
- Recommendations — Other professionals may need to be involved in buying a home, such as lenders, lawyers, home inspectors, and contractors. Your agent will likely have a network of trustworthy professionals that they can recommend.
Keep in mind, however, that despite how helpful an agent might be, you could go it alone. That said, it’s highly recommended to use a local agent, especially if you’re on the homebuying side of the transaction since sellers are typically the ones who pay real estate commission fees.
Step 3. Make An Offer
Once you’ve found a home you love, it’s time to make an offer. Your agent will prepare your offer, which will include items like the following:
- Offer Price — Decide on your offer price, which should be based on recent sale prices of comparable homes in the area.
- Deposit Amount — A deposit is typically required as a promise that you’ll go through with the deal, and is usually 1% to 5% of the offer price. That said, in more expensive parts, it’s typically in the upper range of this spectrum. For example, deposits are typically 5% for the majority of the GTA.
- Conditions — Common conditions to include in your offer are financing, home inspection, Status Certificate review (in the case of a condo), or the sale of your current home. Conditions give you a legal way to back out of the deal in case something doesn’t go as planned.
- Closing Date — This is the date that you take possession of the home.
- Inclusions — Any items that you want to be included in the sale, such as light fixtures, appliances, or window treatments, should be added to the offer.
- Expiry Date — This is the date that the seller must respond before the offer expires.
Keep in mind that the seller may counter your offer, which is typical in the average real estate transaction. This is when your agent’s negotiating skills will come into play to ensure you get the best deal possible.
Learn more: How To Make An Offer On A House In Canada?
Step 4. What Happens After An Offer Has Been Accepted?
Once your offer is accepted by the seller, you’ll need to fulfill the purchase conditions – such as the home inspection and mortgage financing. You’ll also need to provide the house deposit and a host of other things that your real estate lawyer can help you with.
Step 4.1 Get A Home Inspection
If you included a home inspection condition in your offer — which is highly recommended — you’ll have a certain amount of time to have an inspection of the property done. The purpose of a home inspection is to thoroughly examine the home’s condition and is usually conducted by a licensed inspector. This process assesses the overall state of the property and identifies any potential issues that may need attention.
Learn more: Why You Should Never Skip A Home Inspection In Canada
Step 4.2 Get Your Mortgage Approval
A financing condition will give you time to get final mortgage approval after offer acceptance. Hopefully, you’ll have already been pre-approved, which should help speed this process along.
At this point, you’ll meet with your lender and provide additional documents, such as the purchase agreement, and documents verifying your income, employment, and down payment. Your lender may also order an appraisal to verify the value of the home.
Your lawyer will receive mortgage instructions from the lender, after which you’ll need to sign the mortgage documents. Then your lawyer will send this paperwork back to your lender, whose underwriters will then reassess everything again. All monies involved will be moved to your lawyer’s account, which will then be transferred to the seller on closing day.
Step 4.3 Provide House Deposit
You’ll need to provide the seller’s real estate brokerage with your deposit, for the amount specified in your offer. This must typically be done within 24 hours after offer acceptance, though it’s not uncommon for deposit cheques to accompany the offer right on the spot, especially in multiple offer scenarios.
The most common form of deposit payment is through a certified cheque or bank draft, which is usually made out to the seller’s real estate brokerage trust account. Deposit cheques should never be given directly to the seller.
Step 4.4 Tell Your Real Estate Lawyer
A real estate lawyer plays a key role in the closing process and takes care of the following tasks:
- Title Search And Insurance — Lawyers will conduct a title search to make sure the seller is the legal owner of the property and that there are no liens on the title.
- Review Mortgage Documents — Lawyers review the purchase agreement, title documents, and any other applicable paperwork to make sure everything is accurate and complete.
- Register The Deed — Lawyers prepare the deed to the property, which transfers ownership from the seller to the buyer.
- Transfer Funds — Lawyers take care of the transfer of funds from the buyer to the seller and make sure that all financial conditions are met.
Step 5. Closing Day
On closing day, several steps are taken:
- Final Walk-Through — You’ll get to visit the property one more time to ensure it’s in the condition as agreed in the contract.
- Signing Documents — Lots of paperwork will need to be signed, including the mortgage documents, the deed, and other legal documents.
- Funds Transfer — The balance of the purchase price will be transferred to the seller.
- Closing Costs — You’ll pay applicable closing costs, which typically include legal fees, property taxes, land transfer taxes, and title insurance.
- Title Transfer — Your lawyer or title company will register the deed, which officially transfers ownership to you.
- Get The Keys — Once everything is signed and the funds are transferred, you’ll get the keys to your new home.
Learn more: Closing Costs In Canada: How Much Will You Pay?
Things To Remember When Buying A Home
For taking the financial plunge and buying a home, keep the following in mind:
- You Need Home Insurance — If you have a mortgage, your lender will likely require that you take out a home insurance policy.
- Review The Statement Of Adjustments — The Statement of Adjustments includes details about all the financial adjustments between you and the seller so that everyone involved pays their fair share of expenses up to the closing date.
- Check For Easements — Easements are legal rights that allow another party to use part of your property for specific purposes, such as accessing utility lines or an adjacent property.
- Don’t Forget The 90-Day Rule For Down Payments — Most lenders will require a 90-day history of all funds used for your down payment to identify potential money laundering. So, be sure to keep documents that can prove where your money came from over this time period.
Bottom Line
Buying a house in Canada involves careful financial planning, understanding all mortgage options available, and finding the right professionals to work with. If you partner with the right people and prepare yourself accordingly, you can experience a streamlined homebuying process.
