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Newcomers to Canada and their first homes

December 20 2016 by Fabien Major
What you'll learn
  • Precisely identify your needs before buying
  • Carefully determine your budget
  • Get the help from professionals

Have you recently moved to Canada and are dreaming about buying your first home? Here are some tips that will come in handy. Make sure you share this article on social media and by email with your family, friends and community.

It’s important to fully understand how the Canadian system works. It does not vastly differ from other western countries; however, there are some nuances you need to take into account.

First, precisely identify your needs

Once you have determined the number of bedrooms you need, the neighborhoods you are interested in, and the nearby amenities you would like to have (grocery stores, schools, public transportation, parks, highways, etc.), you’ll then have to think about what kind of house you want to live in.

In Canada, you can live in a single-family home, cottage, townhouses, condominiums, multi-unit lodgings, etc. You also have the choice between brand-new, recent and older constructions.

How much can you afford?

While it is everybody’s dream to entirely pay off a home as quickly as possible, this is rarely feasible. The average price for a home in Québec urban centers in 2016—without factoring in electricity costs, municipal and school taxes, telecommunications fees, and other maintenance bills—was $363 000. This means that homeowners finance the purchase of a house or condo over a decade or more. Some mortgages can be amortized up to 30 years.

Next, a buyer must be able to give 20% of the home’s total value as a down payment. With the above example, that represents $72 600. That is a hefty amount. When you can’t put together enough money for a down payment, you must work with the Canada Mortgage and Housing Corporation (CMHC). This governmental organization can insure loans for buyers who cannot afford the 20% down payment.

By paying a premium (oftentimes between 1.8% and 3.6%) when you purchase your home, the CMHC will guarantee that you will honour your payments. The minimum down payment is 5% for houses under $500 000. Try our “How much can I afford” calculator?

The expert that can help you achieve your dream of owning a home is a mortgage broker. He or she will be able to evaluate what the acceptable limits are and put together your application so that it can be approved by a financial institution. 

Before even visiting houses or making offers, make sure you are realistic regarding your budget and understand the ins and outs of buying a home in Canada. Your mortgage broker is your go-to source for all the information you need. This way, you’ll avoid nasty surprises and disappointments!

To evaluate the maximum amount they will lend you, financial institutions will ask for your credit history and score. This is akin to a report card that describes your capacity as a borrower. Generally, it takes a few years as a Canadian citizen to build your credit history. It starts with a permanent address, stable job, and bank account.

Next, in order to determine your capacity to manage your finances, financial institutions will verify how you manage your credit card and other financial obligations. You don’t need many cards or a high limit. One card will do, but remember that if you are always at your limit or skip a few payments, your credit score will suffer.

On the other hand, if you pay your phone and electricity bills, rent and car on a timely basis and within prescribed deadlines, you’ll reassure lenders.

For newcomers to Canada, your past history (income, job stability, and credit) are the keys to owning property.

The dream can become a reality

Once your mortgage broker has succeeded in getting your application pre-approved, you can start looking for a home. If this is your first buying experience, a seasoned real estate agent will let you know where the best neighborhoods are based on your criteria as well as the building specs of each house or condo you visit. He or she knows the current real estate market inside and out and will help you negotiate the best price possible. 

Contrary to popular belief, you don’t pay a real estate agent when looking for a home. He or she will get a commission from the seller. A real estate agent will schedule your visits and ask technical questions to help you avoid problems later on. You should only work with one real estate agent; meet with several in order to choose the one who best understands your needs and has a natural fit with you and your family.

Here are some websites you can use: 

Key takeaways
  • When buying your first home, you need to know how the Canadian system works.
  • Your job stability and credit history are the keys to owning a home.
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