Home Buying

How To Buy a Home in Canada

How To Buy a Home in Canada
Written by
  • nesto
| Jan 27, 2023
Reviewed, Jan 24, 2024

Table of contents

    So you’re ready to buy a house in Canada, eh? Well, you’ve come to the right place! Today we’re going to walk you through the step-by-step process of buying a home in Canada. We discuss literally everything you need to know to make sure things go smoothly. Ready to get your learning on? Scroll to learn all about home buying!

    Key Highlights

    • Before anything else, you should determine if you’re ready to buy a house by checking in on your finances. 
    • Once you determine you are ready for home buying, you should review the process of securing a mortgage and a home in depth to familiarize yourself with what to expect
    • After doing all of these things, you should work with a mortgage broker or mortgage lender directly to assess your mortgage payment and get funded on your dream home!

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    How to Determine When You’re Ready to Buy a Home

    To start, you’re going to want to assess your financial situation, and see if you’re truly ready to buy a house. Homeownership is one of the largest purchases you will make in your lifetime, so it’s vital that you follow the right steps to buying a house to ensure success! Let’s go through the biggest checklist items pre-purchase now.

    Do you have a down payment ready?

    This is the first step in buying a house; do you have a down payment? While many think that they need that traditional, run-of-the-mill 20% down payment to get a home; such is not the case – you can get a house with a mere 5% down payment. 

    So, for example, let’s say you’re eyeing a house with a ticket price of $500,000. Here’s what you need for a down payment at 20% down, 10% down, or just 5% down:

    $500,000 * 0.20 = $100,000

    $500,000 *  0.10 = $50,000

    $500,000 * 0.05 = $25,000

    Not one for math? Get some help with nesto’s own mortgage down payment calculator. Quick, easy, and free!

    Do you meet income requirements?

    Knowing if you meet the income requirements for a new mortgage in Canada is actually quite simple. 

    • First of all, make sure to gather all necessary documents such as payslips, bank statements and proof of employment. Then, lenders will need a credit report that provides a detailed overview of your finances and repayment history. 
    • Finally, they will assess your debt-to-income ratio which must be equal or less than 39% in order to qualify. 
    • Once all your documents are properly reviewed and approved, you can then officially begin the process of obtaining a new mortgage in Canada.

    Is your credit score high enough?

    If you’re looking to secure a mortgage in Canada, it’s important to consider your credit score as one of the factors that lenders will take into account when deciding whether or not to give you a loan. 

    A good credit score is typically 680 or higher. 

    The higher the credit score, the better the chances of being approved for a mortgage with favorable interest rates and other terms. There are different online tools available that you can use to check your credit score and compare it with those who have successfully secured mortgages in recent months and years. 

    With this information, you’ll have an idea of whether or not your credit score is high enough for you to invest in this major purchase.

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    How to Buy a Home in Canada, Step by Step

    Step 1. Save For a Down Payment

    Buying a house is a major financial milestone, and it can seem daunting to build up money for a down payment from zero savings. 

    The good news is that by following a few best practices, it’s a goal that can easily be reached. 

    Start by trimming your expenses, look for areas to reduce – such as cutting out non-essential services or snacks and takeaway.

    A super simple budget? Try the 50/30/20 approach. 50% goes to needs, 30% goes to wants, and 20% goes to savings (in this case, your home fund!). 

    Outside of the budgeting, you should also consider looking into extra work to bring in some additional income, like taking on part-time jobs or odd freelance tasks. This can help you garner up even more money for that down payment in a far shorter time

    Step 2. Pay Down Your Outstanding Debts

    Making sure that any high-interest debt is paid off before looking into buying a home is another key in taking the right steps to purchasing one. Accomplishing this will give you more financial security and show lenders that you are less risky. While it can be a tedious process, taking the time to pay off your debt first is worth it – having a lower debt ratio will make it more likely for you to be approved for a loan, which can save you from paying out large sums of money in the long run.

    Step 3. Prepare Your Documentation

    Securing a mortgage as a first time home buyer in Canada can be an exciting process; however, it is also very important to take the necessary steps to make sure you have everything required for the loan application. 

    Though there are some differences between provinces and lenders, applicants should generally be well-prepared with documents that demonstrate their financial stability, such as pay stubs, 2 years of tax returns, recent bank statements, proof of employment, identification, and credit information. 

    Having these documents on hand will help ensure the mortgage application process runs smoothly.

    Step 4. Check for rebates, grants and first-time home buyer incentives

    When it comes to buying a home in Canada, outside of getting your mortgage pre-approval,, another part of the process, once you’re further along is knowing the rebates, grants, and FTHB incentives available to you. 

    Each province has its own unique set of rules and regulations on this, so it’s important to consult them individually.

    Luckily, we’ve made plenty of guides on this exact topic to make the research far easier for you! 

    Pro tip: Also check out our post on all the first time home buyer grants available in Canada!

    Step 5. Shop for the best mortgage rate

    Shopping around for the best mortgage rates is an essential step for any potential homeowner. Such a search may appear to be a time-consuming, daunting task, but in the end, it will be more than worth the effort and provide substantial savings over time. 

    You should compare mortgages from various lenders to find the one that works best for your financial situation and budget. Shopping around can pay major dividends with multiple lenders offering varying prices or additional services like closing cost discounts or lower down payment requirements. 

    Mortgage Pro Fact: Someone who takes their time and compares offers prudently stands to reap meaningful rewards by finding the mortgage that works best for them!

    Step 6. Find a home within your budget

    Finding a home within your budget is vitally important. Not having an accurate budget or not sticking to it can lead to debt, stress, and other serious financial issues in the near-to-far future. When buying a home, in most cases, your mortgage payments should be no more than 32% of your gross income.

    Establishing a realistic budget helps you determine the best options for purchasing a home. With careful budget planning, you can make sure that you are able to get approved for the loan, purchase your ideal home, and maintain enough money in reserve for unexpected costs related to buying or owning a house. 

    Finding and sticking to a home that fits within your budget can give you peace of mind by ensuring that you are making an informed and financially responsible decision.

    Step 7. Make an offer on the home

    It’s important to do plenty of research beforehand, in order to make sure you understand the local real estate market and have an idea of what kind of offering price would be competitive. You’ll want to reach out to your real estate agent who can help guide you through the legal and financial aspects of this step. 

    They can further advise you on how much to offer for the house, based on comparable homes in nearby areas or by considering specific features that may increase the house’s value. 

    Step 8. Get a home inspection

    Another thing to add to your step by step home buying plan? Home inspections. These are a super important part of the home buying process. They provide  important peace of mind, ensuring that a potential new home is structurally sound and free from costly, or potentially dangerous issues. Home inspectors check for things like drainage issues, mold growth, faulty wiring, plumbing problems, cracked foundations and other potential issues. 

    These can all add up to be expensive repairs if unresolved before purchase. Attending the inspection and learning more about the condition of the home is also a great opportunity to ask questions of the inspector and learn more about any particular concerns you might have about your new property. It’s an invaluable service that can help protect you from costly surprises during homeownership!

    Final Step. Close the deal & move-in

    The time has come for the most exciting part: Closing the deal, calling the place your own, and moving in. 

    At this step, you’ll want to consider time and money costs that go into moving. Will you use a moving service? If yes, you’ll want to budget for that, for example. You’ll also want to make sure that your home is stocked up with the essentials – cleaning supplies, toiletries, and first aid kits. Other than that, it’s time to go; Congrats!

    Final Thoughts 

    Navigating the process of buying a home in Canada for the first time can be intimidating, but it can also be an extremely rewarding experience. Make sure to do your research and ask plenty of questions along the way. If you’re already familiar with the process and ready to secure that pre-qualification from a lender, our nesto mortgage experts are available with your low rate guarantee. Call us today: 

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