Buying your first home in Canada
If you are planning to buy a home, two useful CMHC publications are Buying Your First Home in Canada: What Newcomers Need to Know and Homebuyers Checklist: A Newcomers’ Guide and Workbook. You can download both guides at www.cmhc.ca/newcomers or order them for free by calling CMHC at 1-800-668-2642. These products are available in eight different languages. The information below is based on these publications and other CMHC information products for newcomers.
Looking for a home
Before you begin shopping for a home, it is important to know how much you can afford to spend. You will want to plan ahead for the various expenses related to owning a home. In addition to the cost of buying the home, other main expenses will include heating, property taxes, home maintenance and renovation as required. If you want to do some calculations to project the cost of owning a home, simple calculators and worksheets are available at www.cmhc.ca (type in “mortgage calculator” or “financially ready” in the search box).
Many homebuyers rely on a real estate agent to help them find and buy their home. A good real estate agent will listen to your needs, arrange for home visits and a professional home inspection (see below), and negotiate with the seller to help you get the best possible price. Real estate agents are usually paid through a commission from the seller of the home, which means their services are usually free for a homebuyer. To find a real estate agent, ask your bank and people you know if they can recommend one, or look for the names of real estate agents on “For Sale” signs in neighbourhoods that interest you. You can also visit the Multiple Listing Service® (MLS®) website at www.mls.ca. It lists real estate agents and thousands of homes for sale across Canada.
There are several ways to search for a home to buy:
- Tell friends, family and work colleagues that you are looking for a house. You might hear about homes that are on the market.
- Visit real estate websites, such as www.mls.ca, for information and photographs on a wide range of homes. • Read the new homes section in newspapers or real estate magazines available at newsstands, convenience stores and other stores.
- Drive around a neighbourhood that interests you and look for “For Sale” signs or visit new developments (areas where new homes are being built).
Making an offer
Once you have found a home that fits your budget, your lifestyle and your family, it is time to make an “Offer to Purchase.” If you are using the services of a real estate agent, he or she will help you prepare the offer. If not, you may want to prepare this document with the help of a lawyer (or a notary in Quebec). It is expected that you will negotiate to try and lower the cost of the house.
If your offer of purchase is accepted, you will need to hire a lawyer or notary to transfer the home into your name. To find a lawyer or notary, look in the Yellow Pages or ask your real estate agent for a recommendation.
Financing your home
Most homebuyers do not have enough money to pay for their new home without a loan from a bank (or other financial institution like a “credit union,” a “caisse populaire” or an insurance company). A loan for buying a home is called a “mortgage.” You pay back a mortgage through regular payments over a period of time, usually to a maximum of 25 years. You will be charged interest to borrow this money.
Banks and other financial institutions will offer you many choices to help you choose a mortgage that best matches your needs. Make sure you understand the advantages and disadvantages of each option before making a decision. If you would like help finding a mortgage, you can contact a “mortgage broker” who will work for you to find the best possible mortgage (see the Yellow Pages or search the Internet for listings).
Before you start looking for a home, it is possible to get “mortgage pre-approval” from a bank or financial institution. Pre-approval means that you are approved for a mortgage up to a specific amount with certain terms and conditions. This approval will be valid for a specific period, usually up to 90 days. Preapproval does not mean you have to accept the mortgage – you are still free to look for other arrangements. However, with a pre-approval, you know exactly how much you can spend on your new home. If you are buying a home using CMHC mortgage loan insurance, you will need to get your home loan from an approved lender.
Down payments and mortgage loan insurance
The amount of your mortgage will be determined by the price of the home minus the amount of your down payment. The down payment is a portion of the cost of the home that you pay in advance and it cannot be borrowed. If the down payment is less than 20 percent of the price of your new home, you will probably require mortgage loan insurance.
Mortgage loan insurance protects the bank or financial institution if you are unable to pay back the mortgage. Mortgage loan insurance is also good for you because it allows you to get a mortgage with a lower down payment (as low as 5 percent) and a lower interest rate.
Ask your bank or financial institution for details about CMHC’s mortgage loan insurance or go to www.cmhc.ca and type “mortgage loan insurance” in the search box.
Credit score and history
A good credit history is very important when you are trying to get a mortgage. This is because a credit history shows the lender that you have a good record of paying back your loans. Unfortunately, as a newcomer to Canada, you may not have a credit history that is recognized by Canadian banks and other financial institutions. If you want to buy a home, it is important to begin building a new credit history as early as possible. Speak with a customer service representative at your bank. He or she can help you develop a plan to build a credit history that will help you buy your home.
If you make an offer on a house, it is wise to make your purchase conditional on the home passing a professional home inspection. This allows a buyer to cancel or change an offer if the inspector finds serious problems that are not apparent. For a fee ($300 and up), an inspector will make a detailed inspection of the property. When you receive the home inspection report, you and your real estate agent will have to discuss how required repairs, if any, may affect the price you agree to pay. You can get more information on hiring a home inspector by visiting www.cmhc.ca and typing “hiring a home inspector” in the search box. To find an accredited home inspector, visit www.cahpi.ca or www.inspectionpreachat.org (in Quebec) or search the Yellow Pages.
Source: Welcome to Canada: What you should know
www.cic.gc.ca, Citizenship and Immigration Canada. Reproduced with the permission of the Minister of Public Works and Government Services Canada, 2013