Buying your own home is not something that you do on a regular basis. It is one of the most important steps that you take just once or twice in a lifetime. Having your own home in Canada can give you a feeling of pride. Owning a home gives you the freedom of arranging your living space according to your needs and taste. Are you planning to buy your own home in Canada?- There are many important things that you need to know.
Apart from being an emotional turning point in your life, it is more of a financial decision. To become a smart first time home buyer in Canada, you need to understand the complete home buying process. You need to know about home buying plans, mortgage insurance, first time buyer incentive, mistakes to avoid in first time home buying, and much more. Read below to know everything about the first time home buying process in Canada.
How does a home qualify for a first time buyer incentive?
Even after being sure that you qualify for first time home buying plans in Canada, you need to ensure that your desired home also qualifies for the purchase. The newly constructed as well as resale homes are eligible for purchase only if-
- It is a single family home.
- Either it is a duplex, triplex, or fourplex.
- Your desired home has condominium units.
- It can be both mobile or manufactured home.
- It is a town house.
- Semi-detached homes also qualify.
- It should be available for full time, owner occupied, year round occupancy.
- It is located in Canada.
How much is the incentive?
Once the first time home buyer and the property satisfy the qualifying conditions, the government provides some percentage of the purchasing amount. Depending upon the property type, you can get 5% or 10% of the amount according to the below-listed rules-
- For a new construction of the property, you can get 5% or 10% of the net value.
- For a re-sale home, you can get 5% of the net value.
- For mobile or manufactured homes (new as well as re-sale), you can get 5% of the net value.
Other than the above-mentioned three plans, the governments of some provinces also provide land transfer tax refunds and mortgage loans. The land transfer tax refunds are available for first time buyers. However, the mortgage loan insurance is provided by the Canada Mortgage and Housing Corporation (CMHC).
What is mortgage loan insurance?
Mortgage loan insurance lessens the financial burden on first time home buyers in Canada. In case your down payment is between 5% and 20% of the net purchasing amount, you can easily apply for mortgage default insurance.
The Canadian Mortgage and Housing Corporation (CMHC) provides the mortgage loan insurance. This insurance lessens the down payment for a first time home buyer and protects the lenders against mortgage default. As a first time home buyer and mortgage insurance applicant, you would have to pay a down payment of-
- 5% for homes whose purchase amount is less than $5,00,000.
- 10% for mortgage which insures $5,00,000 and more.
Moreover, you cannot apply for mortgage loans if you wish to buy homes of worth more than $1 million. These homes require a 20% down payment and thus do not qualify for mortgage insurance.
The net mortgage amount can be repaid in a lump-sum manner or it can be given as monthly installments.
What are land transfer tax refunds?
First time home buyers can also opt for land transfer tax refunds, if they qualify for the same. Depending upon the property type i.e. newly constructed or re-sale home and the date of purchase, first time buyers can apply for these refunds. They can get land transfer tax refunds of up to $4000 if they are eligible and satisfy all the necessary conditions.
Plan smartly for first time home buying in Canada-
If you wish to buy a new home in Canada and are a first time buyer, you need to plan your purchase very smartly. Follow the below-mentioned step-by-step guide to be a smart first time home buyer in Canada-
Be ready with the down payment-
The first and foremost step towards home ownership in Canada is saving for its down payment. After being sure about the entire ownership process, you should start saving for the down payment. Make realistic financial discipline in your routine and follow your plans to save for your dream home.
Make up your mind-
When you start saving for your down payment, think about saving your time also. Make up your mind, think about the type of home that you want for your family and be ready for the required financial commitments. Not just the type of home, think about the location of the home also. Choose the location that has schools, hospitals, and your workplace nearby.
File up your important documents-
You must know that getting a mortgage approval would need a lot of paperwork from your side. Your mortgage lender would ask for your proof of employment, employment information, your financial statements, your assets, pending debts, total savings, miscellaneous investments, and much more. So, don’t let it bother you in the times of need. Be ready with all the required documents beforehand only.
Apply for a pre-approval to get mortgage-
Your mortgage lender would assess your savings, income statements, property type, and would evaluate your finances. This would help him finalize about the qualifying criteria and the amount of loan that you can get. This is one of the most important steps in your home ownership process. This will fasten up the closing process and help you get your home in the minimum possible time.
Find your dream home-
First time home buyers literally love this step. Once you get the pre-approval for the mortgage loan, start looking out for the dream home that you want. For getting the best of properties, you should seek for the help of a professional realtor. Make a list of your preferences and convey it to the realtor. Find a home that suits all your family needs and taste as buying a home is not something that you would do on a regular basis.
Some other miscellaneous tips-
Make smart offers for the purchase-
Always consult with your realtor before making purchase offers for your desired home. Make smart and budget-friendly offers for purchase so as to spend the minimum possible amounts.
Get assured with your mortgage approval-
Always work with an experienced loan officer while filing for your mortgage loan so as to get assured approvals.
What are the most common first time home buyer mistakes?
Being a first time home buyer in Canada, you might make some mistakes because of lack of knowledge and experience. Some common mistakes made by first time buyers are-
Wrong estimations of home ownership costs in Canada-
Remember to count the property taxes, inspection costs, and closing expenses in your ownership costs. Don’t just consider the purchasing price as the net ownership cost.
Hiring an inexperienced realtor-
An experienced realtor would help you find the most suitable property and crack the most budget-friendly deal. So, remember to hire only the experienced realtor.
Ignoring the home inspection-
You might think to avoid the home inspection reports before finalizing the deal. But this would lead to great repairing costs and emotional suffering afterwards. So, remember to check the home inspection reports before finalizing the purchase deal.
Not having the required down payment on time-
Your lenders would ask for a minimum down payment before the purchase. So, make realistic saving plans and be ready with your down payment beforehand only.
How can you smartly afford to pay for your new home in Canada?
The Canadian government advises some rules to pay for the home ownership expenses. You have to bear with your family expenses and save for emergencies as well. So, the net expenditure on buying your home should be a wise decision.
The Canadian Mortgage and Housing Corporation (CMHC) advises to spend less than 35% of your gross monthly income on buying a home, if you are a first time buyer. To avoid any kind of financial burden afterwards, you should spend no more than 35% of your gross monthly income on the mortgage expenses.
How Home Mortgage Care help First Te Home Buyers
Buying your own home is no less than an achievement in Canada. So, stay wise enough to crack the most budget-friendly deal. Always work with an experienced loan officer and realtor. Save well for your required down payment and enhance your knowledge about first time home buying in Canada. If you are all set to buy a new home, Home Mortgage Care is there to help you by picking the best deal. We look for the best lender who can provide you financial assistance so that you can buy your dream home. You must contact us to know the cost of borrowing and how much maximum you qualify. Get your mortgage approved at the lowest rate with us.
Give us a call today!
