Did you just relocate to Canada or you have been living in Canada for a long time? Do you intend to buy a new house? Then welcome to our house-buying guide in Canada. Buying a house is one of the most exciting and stressful experiences you’ll go through. It’s a big commitment financially, requires lots of paperwork, and involves many steps. Once you finally buy your dream home, you’ll want to protect it with house insurance.
Getting the right house insurance gives you peace of mind knowing you’re covered for damage and liability. It can prevent financial hardship if something happens to your property. This guide will walk you through the entire process of buying a house and getting house insurance in Canada.
How Much Can I Afford?
Determining your budget is the first step in house hunting. How much do you have and what type of house do you want to buy? As a rule of thumb, total monthly housing costs (mortgage, insurance, property tax, utilities) should be less than 32% of your gross monthly income. Mortgage lenders will approve you for 3-5 times your income. Crunching the numbers will give you a price range to stay within.
You will need a Real Estate Agent
After sorting out your budget, then it is time to hire an agent. A real estate agent will help you through the home-buying process. A good agent knows the local market, can set up viewings, advise you on offers, and negotiate on your behalf.
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Ask friends and family for recommendations of agents they’ve worked with and liked. You want someone responsive, experienced, and who you feel comfortable with. The right agent-client relationship is extremely valuable for first-time home buyers.
The Neighborhoods and Home Types
Once you’ve hired an agent, it is important to let him or her know your choice of location and the type of house you want. Taking into consideration that location plays a huge role in determining the price of a house.
Below are some of the things you need to consider when picking a location,
- Commute to work
- Proximity to schools
- Access to public transit
- Safety
- Parks and amenities
- Type of housing (detached, townhouse, etc)
- Yard size
- Number of bedrooms and bathrooms
Drive around target neighbourhoods to get a feel for them. Narrow your preferences down to 2-3 ideal areas.
Randomly look at Houses
Now the fun part begins – looking at houses! Your real estate agent will schedule viewings for houses matching your wish list. Attend open houses and view properties in your favourite neighbourhoods. Take lots of notes and photos at each show. Pay attention to layout, condition, renovations needed, and extras like finished basements.
Conduct a Home Inspection
A professional home inspection is strongly advised before finalizing a purchase. An inspector will examine the property and identify any urgent repairs or issues like a leaky roof, faulty wiring, or HVAC problems. You can request the seller make repairs, lower the price, or cancel altogether based on the inspection report. If satisfied, you’ll remove the conditions and arrange a closing date.
Home Inspection Essentials
A home inspection provides an objective assessment of the property’s condition from attic to foundation. Here’s how to make the most of it:
- Use a licensed home inspector experienced in your area. Get references from past buyers.
- Budget $300-$500 for a standard inspection. Additional tests can be done.
- Attend in person – they’ll explain issues on the spot.
- The report helps you negotiate repairs, price changes or opting out.
- Check structural, electrical, plumbing, HVAC, roofing, insulation, windows, appliances etc.
- Prioritize big ticket items – foundation, roof, flooding risk.
- Small things can be fixed over time. Focus on major red flags.
- Reinspect repairs are done by the seller before closing.
Though not mandatory, an inspection gives you information and protects your investment.
Make an Offer
Found your dream home? It’s time to make an offer! Your agent will draw up an Offer to Purchase for the listing price or less. Outline your conditions like a home inspection and financing clause.
The seller may accept, reject, or counteroffer. Be prepared to negotiate on things like price, closing date, inclusions, and more. If you reach an agreement, you’ll firm up the deal with a deposit.
Secure Home Insurance
Home insurance is required by mortgage lenders to protect the property securing the loan. But it also protects you as the homeowner. Start shopping rates 30-45 days before your closing date. Standard home insurance covers the dwelling, detached structures, liability, and personal property. Compare premiums and coverage from various providers.
Here’s how to find the best policy
Coverage Types
- Dwelling coverage – for home structure and attached fixtures
- Detached structures like garages and sheds
- Personal property coverage – for possessions inside the home
- Personal liability – if someone is injured on the property
- Extra coverage like floods and earthquakes depending on the location
Factors Affecting Premiums
- Location of home
- Age and condition of home
- Reconstruction costs
- Amount of personal property coverage
- Deductible amount
- Protective devices like alarm systems
Tips for Choosing a Policy
- Shop around and compare quotes from insurers
- Look for discounts – multi-policy, new home, home security
- Understand exclusions that apply
- Choose appropriate deductibles for your budget
- Pick guaranteed replacement cost coverage
- Bundle with car insurance for savings
Choosing the Right Mortgage
There are numerous mortgage options out there. Which one is right for you?
Type
- Fixed-rate – Interest rate stays the same over the full term.
- Variable rate – The interest rate fluctuates along with the prime rate. More risk but a lower initial rate.
- Hybrid – Fixed rate for a set period, then converts to variable rate.
Term
- 6 months – 5 years: Shorter terms usually have lower rates.
- 5 years: Popular option, balance of rate and term length.
- Longer terms of up to 10 years have higher rates but lower payments.
Match the mortgage term to how long you plan to stay in the home. Know your comfort level for rate fluctuations and budget.
Documents Needed for Your Mortgage Application
Gather these key documents together when applying for a mortgage:
- Identification like driver’s license and passport
- Income verification – paystubs, W2, tax returns
- Downpayment source paperwork like bank statements
- Debts and credit report
- Property details like the listing if available
- Statements showing assets and investments
- Land title if you already own property
- Divorce, separation, or child support documents if applicable
Getting a Mortgage Pre-Approval
Getting pre-approved for a mortgage from a lender is one of the very first steps. Here are some tips for securing a pre-approval:
- Check your credit score and report. Take steps to improve it if needed. Lenders look for scores above 680.
- Gather your financial statements – income, tax returns, downpayment source, investments, debts.
- Research mortgage rates and talk to multiple lenders – banks, brokers, credit unions, etc.
- Be ready to pay the application fee and provide documents.
- You’ll receive a pre-approval letter stating the amount you’re eligible for.
Having this letter will make your offer more attractive to sellers.
Avoiding Extra Fees and Penalties
When taking out a mortgage, watch out for extra fees and penalties that can cost you. Avoid:
Prepayment Penalties – Charges for paying your mortgage off faster than scheduled. Make sure these don’t apply.
Mortgage Default Insurance – Added for downpayments less than 20%. Adds to your interest costs. Put at least 20% down to avoid it.
Home Appraisal Fee – Can be $300-$500. Shop lenders who cover this or reimburse you.
Mortgage Insurance Premium – Ongoing mortgage insurance costs on high-ratio mortgages. Put down 20%+ to avoid.
Preapproval vs Prequalification – Preapprovals are fully underwritten, not just prequalified based on stated information.
Fine Print – Carefully read all terms and disclosures so you know what’s covered. Don’t get surprised by fees at closing time.
Ask lots of questions upfront and read the fine print to avoid extra costs on a mortgage. This saves you big in the long run. l make the mortgage process much smoother. Promptly provide any other documents the lender requests.
Close the Deal
Congratulations, it’s finally closing day! This means taking legal possession and getting the keys. The closing involves signing a pile of paperwork and bringing your down payment plus closing costs. Your agent and lender will assist you through this process. Celebrate when you get the keys to your new home!
Here’s an overview of what to expect:
- Final walkthrough – verify house condition and fix any issues
- Sign the deed and mortgage documents
- Pay your downpayment and closing costs
- Get front door keys, garage remotes, alarm codes
- Utility transfer – contact providers to switch billing to your name
- Change mailing address for bills, subscriptions, etc
- Unpack boxes and move into your new home!
Your real estate agent and lender will assist with closing details. Celebrate this milestone moment in your new home.
Conclusion
Buying a home is one of the biggest financial decisions you’ll make in life. While extremely exciting, it also involves a lot of stress and planning. Doing your homework on the front end makes for a smoother process.
Determine your budget, find a trusted real estate agent, get pre-approved for a mortgage, and start viewing homes. Make an offer contingent on a home inspection to avoid surprises. Once your offer is accepted, proceed through the closing process with help from your agent and lender. Open new utilities, move in your belongings and make the house your own.
