Buying your first home is an exciting life step and a major financial decision. In Quebec, this process is governed by specific rules and requires the involvement of certain professionals (brokers, notaries, inspectors).
To ensure that everything goes smoothly, it’s important to understand the key steps.
Step 1: Calculate your budget and borrowing capacity
Before you start looking at homes, you need to determine how much you can borrow. A realistic budget will help you avoid disappointment and make sure you’re looking at properties you can afford.
How do you calculate your mortgage borrowing capacity?
Your mortgage borrowing capacity is the maximum amount a lender will allow you to borrow. It is calculated based on:
- Your gross income: income from employment and investments, as well as private and government pensions, employment bonuses (depending on the lender), a portion of rental income and support payments, etc.
- Your current debts: loans (student, auto, personal), car lease payments, credit card balances, lines of credit, child support, co-signed loans, etc.
- Your gross debt service (GDS) and total debt service (TDS) ratios: these two ratios are generally used by lenders to determine whether your debt and housing payments remain reasonable relative to your income.
- Stress test: Since 2018, you must qualify for a rate higher than your current rate to ensure that you can still make your payments if rates increase.
For a quick estimate, use our online borrowing capacity calculator to determine your maximum budget.
Other costs to consider: welcome tax and adjustments
Make sure your budget includes the property transfer tax (“welcome tax”) and adjustments for municipal or school taxes already paid by the seller.
What’s the minimum down payment to buy a home in Quebec?
In Quebec, the required down payment to buy a home is at least 5% of the first $500,000 of the purchase price, plus 10% of the remaining amount. For a property that costs $1.5 million or more, the minimum down payment is 20% of the home’s value.
For example, if a home is listed for $800,000, the down payment will be $55,000: that’s 5% of $500,000 ($25,000), plus 10% of $300,000 ($30,000).
The larger your down payment, the lower your risk to the lender and the more you may be able to borrow. Your down payment will also influence your CMHC, Sagen, or Canada Guaranty mortgage insurance premium.
Mortgage insurance premiums are calculated based on a percentage of the loan amount. This percentage is determined by your loan to property value ratio. The higher your down payment, the lower your premium.
- Down payment of less than 20%: You are required to purchase mortgage loan insurance. This premium will be added to your loan.
- Down payment of 20% or more: You won’t have to purchase mortgage loan insurance, which will lower your total borrowing costs.
Some government programs can help you become a homeowner, such as the Home Buyers’ Plan (HBP) and first home savings account (FHSA). Tax credits and grants are also available to help first-time homebuyers.
Step 2: Get your mortgage preapproval
Getting preapproved for a mortgage is the next important thing you should do before you start looking at homes. A preapproval gives written confirmation of your borrowing capacity at a mortgage rate that is guaranteed for 90 to 120 days. Submitting an offer with a preapproval demonstrates your commitment and speeds up the process.
Your Multi-Prêts broker will collect the required documents (income, debts, credit report) to negotiate your preapproval.
Step 3: Find the right property and prepare an offer to purchase
Once you have your preapproval, you can start house hunting. Found the home of your dreams? It’s time to make an offer!
An offer to purchase is a legal document that specifies the proposed price and conditions that must be met for the sale to be finalized. The most common and important conditions are:
- Financing: The purchase is contingent upon the buyer obtaining a mortgage within a specified time frame.
- Inspection: The purchase is contingent upon a satisfactory inspection of the property.
Make sure the offer remains subject to review by your mortgage broker to avoid any unpleasant financial surprises.
Step 4: Inspect the property and purchase your insurance
Once your offer is accepted, the countdown to fulfill the conditions begins.
- Building inspection: This is essential to ensure that your dream home isn’t hiding any unpleasant surprises. The inspection report will give you an overview of the building’s condition and allow you to negotiate the price or withdraw from the transaction if any major problems are found. The cost of an inspection ranges from $650 to $800 for a single-family home, according to the Association des inspecteurs en bâtiments du Québec (AIBQ).
- Mortgage appraisal: Lenders may require an official appraisal of the property by a professional to ensure that its market value is consistent with the amount of your offer to purchase. For standard loans, appraisal fees are usually paid by the lender.
- Home insurance: You must provide proof of home insurance before receiving the funds.
These steps are crucial for turning your offer to purchase into a solid contract.
Step 5: Finalize your mortgage financing
Once all of the conditions are met, your broker will confirm your final interest rate, make sure that all of the lender’s documents are in order before they’re sent to the notary, and verify that any necessary adjustments (e.g., CMHC premiums) have been made.
The goal is to ensure that your financing documentation is complete and accurate before your appointment with the notary.
Step 6: Finalize the sale and pick up the keys
The final step in buying a home is officially signing the documents at the notary’s office, a mandatory procedure in Quebec for all real estate transactions.
Two visits are usually necessary: The first is to sign the mortgage deed. You’ll then need to wait 3 to 10 business days before seeing your notary again. During the second meeting, you’ll sign the deed of sale in the presence of the sellers and the notary.
How much does a notary charge for a home purchase in Quebec?
Even though the notary works for both parties throughout the process, the buyer is responsible for choosing them and paying most of their fees and costs.
A notary’s fees for the purchase of a home vary depending on the complexity of the transaction and the price of the property, but you should generally expect to pay between $1,500 and $2,500 in legal fees. These fees cover:
- Verification of the property titles
- Preparation of the deed of sale and the mortgage deed
- Management and disbursement of the funds
These fees must be paid to the notary at the time of signing, along with your down payment.
On average, how long does it take to buy a house, from making an offer to signing the contract?
Generally, it takes 30 to 60 days once the offer is accepted. This allows enough time for the inspection, appraisal, and finalization of the financing by the notary.
As a first-time homebuyer, you need security, clarity, and, above all, the best possible mortgage rate. The Quebec mortgage market offers a wide range of options, but navigating it on your own can be complicated and stressful.
A Multi-Prêts mortgage broker can help you make sense of it all.