13 Steps To House Buying In Canada: Complete List

Shop the best mortgage deals in Canada. approvU allows you to comparison-shop for the lowest rate mortgage deals across 25+ lenders and brands in Canada.

12K+

Mortgage Deals

25+

Lenders & Brands

$$

Huge Savings

Overview Of Steps To House Buying In Canada

Buying a house in Canada is one of the most important decisions ever.

That’s why it’s essential to go through this list before taking the plunge.

This complete guide has everything you need to know about house buying, from deciding whether or not now is the right time for your family to what kind of mortgage rates are available and even how much money you should be saving up for a down payment.

Is Now The Right Time To Buy A House?

Before deciding to purchase, you need to ask yourself if it is the right choice for you at this time. Buying a house is a significant commitment.

Before shopping for properties or comparing mortgage options, you must ensure you’re ready to be a homeowner.

The first step is determining whether or not it makes sense financially for you even to consider buying a house.

Many new homeowners have some financial regrets after taking on too much expense. So take some time to assess your financial and family needs, both short-term and long-term.

Having these factors nailed down before committing yourself long-term to buying a property that may be out of your budget either initially or down the road due to unexpected costs is essential.

House buying is an important decision and should not be rushed.

Are You Financially Ready?

First, consider your finances and how they will be affected by buying a house. Ask yourself these essential questions:

How much money do you have saved up in emergency funds? Contingency planning is also essential, in addition to figuring out where your down payment will come from. You should consider what could happen if your car breaks down or someone in your family gets sick.
How much money do you have left over each month? How much is left over to put towards savings once you’ve paid for the necessities such as housing, utilities, bills, and groceries? If it seems like not a lot of money is going into savings after paying all the bills, then buying a house may be too soon.

Shop Across 25+ Lenders For Your Best Mortgage Deals

See Your Personalized Mortgages Online With approvU

How Much House Can You Afford?

Before you talk to a mortgage lender, figure out on your own how much house you can comfortably afford.

A lender will give you an estimate of how much money you qualify for. Still, you should make sure that you are not overextending yourself by determining your budget and what you realistically can afford to spend on mortgage payments each month.

To get a reasonable estimate, look at your Debt-to-Income (DTI) ratio.

Mortgage Affordability Calculator

Understanding The Debt-To-Income (DTI) Ratio

Look at your present debts and income to see how they compare. The DTI is calculated by dividing your monthly debt by your gross monthly earnings.

Assume you have $2,000 in monthly obligations and a gross salary of $8,000.

Your DTI would be $2,000/$8,000 or 25% ($2,000 divided by 10,000).

Remember that homeownership comes with several costs.

Costs you don’t need to worry about while renting. You will pay property taxes and maintain some form of homeowner’s insurance.

Factor these and other expenses into your household budget when deciding what kind of house payment is comfortable for you.

Lenders look closely at the DTI to determine how much they can afford to pay on a mortgage. Most lenders look for a DTI of 44% or less when approving a mortgage application.

Suppose your monthly housing expenses are too high. In that case, it might be difficult for lenders to guarantee approval unless compensating factors such as high credit scores or solid employment history exist.

The more you can reduce your DTI, the better off you’ll be when applying for credit, making it easier to get approved and secure financing at competitive rates.

Mortgage Down Payment

A down payment is a significant one-time expenditure made toward acquiring a house. Your down payment needs will vary based on the property you wish to purchase, your credit record, income type, and property value.

The more expensive the dwelling, the higher the down payment.

The down payment can be anywhere from 5% to 20% of the property value.

Money for your down payment can come from your accumulated savings, gifts from family members, or your RRSP investment.

Note that funds withdrawn from an RRSP must be paid back to minimize future tax implications.

The minimum required down payment for properties below $500,000 in value is 5%. A mortgage default insurance premium is required for down payments below 20% of the property’s purchase price.

This insurance protects the lender against default should your income or employment situation change.

The insurance cost will vary depending on your loan-to-value ratio (LTV) and how the property will be used (rental property, principal residence, vacation property, or second home).

The average fee can range from about 2.80% to 4.00% annually.

Track Your Credit Score

Obtaining a loan is not always an easy feat. Every institutional mortgage lender will assess your credit character by reviewing your credit record when determining your eligibility for a mortgage loan.

If you’re looking to get approved fast, having an excellent credit score will be the best possible outcome of your efforts.

When lenders review your credit record, they look at things like;

The number of debts you have and how much you owe for each
your identification information like your name, address, employment, and even SIN
Recorded activities like past applications
Payment history for each debt you have open

Paying off any outstanding debts is essential to improve your credit score quickly. A low credit score will impact the likelihood of obtaining a loan, even at a favourable interest rate.

Where Do You Want To Buy?

Once you’ve decided how much you can afford and what you’re willing to spend on a house, the question of where to buy becomes more relevant.

Factors such as commute times, public transportation options, community amenities like schools, libraries, and parks, plus safety rankings will become essential when making this decision.

Another consideration for families with younger children in school rankings and how they might impact the quality of education. Although very important, the potentially higher costs of living near some top-tier schools are worth noting.

With remote working becoming a regular part of every family’s existence, more significant properties outside the city might be an option worth considering. However, if commuting could be in the cards in the future, understand how your location will impact your travel.

Whatever your family’s needs are, it is essential to start looking at the options available early on to ensure you find a place that fits all of your requirements.

It’s best not to rush this process and miss out on what could become a home sweet home if done right!

So make sure you take some time before jumping into the market head-first by researching neighbourhoods and what they offer.

Shop Across 25+ Lenders For Your Best Mortgage Deals

See Your Personalized Mortgages Online With approvU

Get Pre-Approved For Mortgage

Another critical step in the home-buying process is to get pre-approved for a mortgage before you begin house hunting.

This ensures that sellers will accept your offer because it’s clear that you have financial backing.

It also means that when homes come on the market, whether they are listed with realtors or private owners, you’ll view them, knowing exactly how much house you can afford.

If possible, try and get approved for more than what you think you would be comfortable spending, so if an attractive property comes up at or below budget, there won’t be any surprises later down the road.

Prequalification vs. Pre-approval

It is essential to understand that getting prequalified for a loan is not the same as pre-approval. With a prequalification, the lender has not done any due diligence to ensure you can afford the loan.

On the other hand, a pre-approval is when a lender does their homework and verifies your income, liabilities, credit history, and overall financial situation. They then assure you that if you were to purchase a home in this price range (which they should know since they’ve already reviewed it with you), you would be approved based on what they have seen up until now.

A pre-approval is valid for 120 days and provides an understanding of how much a mortgage you will likely be able to afford. It is also important to note that getting pre-approval from one lender does not mean you cannot continue shopping for lower rates.

Hire A Real Estate Agent

Connecting with an experienced agent that fits your needs will provide much-needed clarity in such a big decision as purchasing real estate, especially for first-time buyers who may be unsure of what to expect from this process.

There are many tasks needed to buy a house, so choosing an agent that will work closely with your needs and schedule is essential. If they’re not available or accessible for questions at a time that suits you, then perhaps working together is not suitable for both parties.

When considering hiring or using an agent, there are many factors: fees, communication style (in-person vs. phone), availability, and personality fit.

A real estate agent is your representative and needs to be someone that you trust. Choose an agent with your best interest at heart who will work hard to find the right home for you on time, especially if it’s challenging to find homes within your price range or preference.

Go House Shopping

There are many types of houses on the market – single-family homes, condominiums, or townhouses. Do some research on what might best suit your needs.

Once you’ve got your agent and pre-approval in hand, it’s good to look at your priorities so that your agent can help you create a shortlist of properties that might be suitable.

Your agent will also be able to help you determine what properties are within your price range and work with their contacts to get a better idea of comparable homes that have sold recently.

After creating this shortlist, it’s time for the fun part: house hunting!

Look at every property on the list, even if it doesn’t quite fit all your criteria.

There is no perfect home so try not to be too picky until you see the listings in person. As more houses come up for sale or go under contract, you’ll find that not all of your priorities have the same weight.

A real estate agent can give helpful insight into which priorities should be higher or lower on your list based on your current and future needs.

Taking a House Tour

When you’re ready to tour the house, make sure that you take copious notes and photos.

The agent can help point out things about the property, like local amenities, parks, and schools. They may also tell if something seems amiss or could use some work that might not be readily apparent from just looking at photos online or in a listing book.

Be Patient With Your Search

You’ll find that the more houses you see, the more they all start to blend. So, try to be organized and talk through the things you like and dislike about each property with your real estate agent so they can help guide your search!

Over time specific criteria like location, exterior space, local amenities, and how many bedrooms or bathrooms you want will become more or less critical.

Keep your priorities in mind while house hunting, as they will help guide you and not just be swayed by a pretty home with excellent curb appeal.

Choosing The Right House To Buy

When thinking about the type of house to buy, try to look at your needs from two different points of view:

Family Needs

Your personal needs and wants will vary depending on your situation. However, there are some common factors that many buyers look for in a house.

You may like to have ample enough yard space for outdoor entertainments like family BBQs.

Another consideration is the number of bedrooms available. If having children has been part of your long-term plan, then account for the growth you will need to accommodate in the future. Similarly, considering downsizing, consider how much space you have now and what you will need in a new property.

Lifestyle Needs

Wherever you decide to buy should be convenient, whether close to work, amenities, or entertainment venues. This could mean living in more urban areas versus suburban areas since they often come equipped with these needs.

It is important to note that buying in an urban area may mean having less square footage than you’d like. So if these factors concern you, it’s best to look at properties within city limits or nearby suburbs with similar convenience needs.

While this seems like a lot at first glance, it takes to heart that many communities have excellent online resources with details, from school rankings and crime rates to parks, playgrounds, and other amenities.

You should also visit some neighbourhoods in person before you commit to buying there.

Shop Across 25+ Lenders For Your Best Mortgage Deals

See Your Personalized Mortgages Online With approvU

Make An Offer

Once you’ve found the perfect home that suits your needs, it is time to make an offer. However, before you do, discuss your bid with your real estate agent and determine if it is reasonable.

Depending on how hot the market is and how much interest there is in your selected home, you could get into a bidding war with other purchasers.

Even if you are the only person interested in the property, the seller could make a counter-offer which you will need to negotiate.

Offers can be made contingent on the home’s inspection report, financing, or other factors.

Home Inspection

A home inspection should be part of your offer condition to buy the house. A home inspector will check the condition of all the major components of a home, including the foundation, walls, and roof.

Based on the inspection results, you can either proceed with your offer as it is or amends your initial offer. Your amended offer should reflect the concerns raised in the inspection report.

The seller has to disclose anything they know regarding structural issues with the property or remain responsible for the repair costs even after they are sold.

Once everything gets sorted out – loan approvals, disclosures from sellers, and so on – you’ll need to set up a closing date which can vary from weeks to months, depending on where you live in Canada!

Applying For A Mortgage

When choosing a mortgage, there are many things to consider, including total borrowing costs (interest rate and fees), repayment schedule of the loan, the lender, and how the mortgage terms fit your current and future situation.

You have to consider different mortgage rate options, but the most common ones available in Canada are variable and fixed-rate mortgages.

The mortgage rate for variable mortgages adjusts with the market, whereas the mortgage rates for fixed mortgages stay the same throughout the mortgage term.

If you take out a variable mortgage, your monthly payment could fluctuate with the lender’s prime rate, as well as economic factors that influence rates, such as employment data, exports/imports around the globe—the list goes on! If you’re not comfortable with this variation, choose the fixed mortgage rate, which will help you budget better.

With so much information, it can seem daunting to understand which type of loan is right for you. Although there are benefits associated with both options, one thing remains true: being knowledgeable about what each entails will help ease any stress felt throughout this process.

A mortgage broker can help you sort through these options and also help you find the right lender for your specific situation. They’ll also check if lenders will accept any offers on properties you may be interested in buying – this is an integral part of pre-approval before making an offer!

Fulfill The Mortgage Conditions

Your approval or commitment letter outlines conditions you must fulfill to fund your loan application. These conditions confirm your income, down payment, identification, and residency status. Some conditions need your declaration and acceptance. These conditions are fulfilled once you sign and submit the commitment letter.

In addition to the above, you will also have to meet with your lawyer to complete other paperwork.

Shop Across 25+ Lenders For Your Best Mortgage Deals

See Your Personalized Mortgages Online With approvU

Your Mortgage Funded And Closed

Once the conditions are fulfilled, and the loan is cleared for funding, the lender will wire the money to your lawyer. On the closing day, your lawyer will complete the Title registry with the City. This involves registering you as the new owner and the lender as the lienholder of the property.

Once that is done, the lawyer will disburse the funds to the different parties as required – seller, buyer, and the real estate agent (sales commission). The lawyer will also provide you with the keys to your new home.

Moving Forward With Your House Buying

This article has gone into great detail about Canada’s 13 home buying steps. Following each step carefully and moving forward at your own pace will be smooth sailing when closing day arrives!

Remember – while it might seem that you’re navigating all of these challenges alone, an excellent real estate agent, mortgage broker, family members, and friends are all there to support you along the way!

Get A Mortgage With approvU

approvU is everything you need to make the right mortgage decisions like a Pro!
Born in Canada for Canadians
Largest mortgage marketplace with over 12,000 mortgage deals from 25+ lenders
No baiting; not a lead generator; your information is never sold
Skip the appointments and apply online anytime; it takes less than 6 minutes.
Multiple approvals from a single submission
Control and track every step of your application as it moves through to funding.

13 Steps To House Buying In Canada: Complete List

12K+

25+

$$

Skip Tip...

Overview Of Steps To House Buying In Canada

Is Now The Right Time To Buy A House?

Are You Financially Ready?

Shop Across 25+ Lenders For Your Best Mortgage Deals

How Much House Can You Afford?

Mortgage Affordability Calculator

Understanding The Debt-To-Income (DTI) Ratio

Mortgage Down Payment

Track Your Credit Score

Where Do You Want To Buy?

Shop Across 25+ Lenders For Your Best Mortgage Deals

Get Pre-Approved For Mortgage

Prequalification vs. Pre-approval

Hire A Real Estate Agent

Go House Shopping

Taking a House Tour

Be Patient With Your Search

Choosing The Right House To Buy

Family Needs

Lifestyle Needs

Shop Across 25+ Lenders For Your Best Mortgage Deals

Make An Offer

Home Inspection

Applying For A Mortgage

Fulfill The Mortgage Conditions

Shop Across 25+ Lenders For Your Best Mortgage Deals

Your Mortgage Funded And Closed

Moving Forward With Your House Buying

Get A Mortgage With approvU

Education

Tools & Resources

About approvU