Buying a House in British Columbia
How to buy a house in British Columbia
Buying a house in British Columbia can be exciting and daunting all at once. With all the research, paperwork, and deadlines in play, you need to know what to expect and how best to plan towards it. More so, before you start looking for a house to buy, you need to have considered what you can afford so you can ‘cut your coat to suit your cloth’. Being realistic, and expectant of unforeseen circumstances will also help you get the best home buying experience. Nevertheless, here is a stepwise guide to what you need to know upfront about buying a home in British Columbia.
Step 1: Determine if you’re ready to buy a house
Unless you have enough money to pay outrightly for your new house, a few factors will determine your readiness to venture into the British Columbia market in search of a house to buy. All being equal, if a home buyer meets these significant requirements, they should have no drawbacks in completing paperwork and moving into their new house.
Income And Employment Status
The first thing you need to consider is your income. Are you employed or unemployed? As an employee, you receive a certain amount of money as payment for your labour every month. Even if you are self-employed, you will still receive income, although it may not be as consistent as an employed person.
Debt-to-Income Ratio (DTI)
While your employment status is crucial in determining your readiness to buy a house, your gross and net income are equally important. If you incur too much debt, then your net income will be too low to save anything significant to buy a house. As such, it is recommendable to keep your debt-to-income ratio below 42%.
If you do not have enough funds to pay for a house in British Columbia outrightly, then you can go the mortgage way. But every mortgage requires you to have a down payment. A down payment is the amount you pay for a house upfront. While how much you pay as a down payment depends on the lender, generally, the down payment should not be less than 5% of the purchase price. Moreover the higher your down payment the less you’d have to pay in interest.
Before accepting a down payment your lender will assess your credit score which is also referred to as your risk profile. Importantly, when you want to buy a house using a mortgage, it is crucial to have a good credit score. Most lenders will require you to have a credit score of 650 which also provides you with mortgage options and lower interest rates. However, this does not mean there isn’t hope for people with a bad credit score. There are other options people with a bad credit score can capitalize on when they want to buy a house.
Step 2: Calculate how much you can afford to buy in British Columbia
To get an idea of how much house you can afford in British Columbia, a good rule of thumb is to use an accurate mortgage affordability calculator. The calculator uses your gross income, credit score, down payment amount and other important details to give you an idea of how much mortgage you should expect to get from the bank and the price of the house you should be looking at. You’ll also see your estimated monthly mortgage payment and expected interest rate to decide whether your income can handle such monthly expenses.
Step 3: Save for your Down Payment, Closing Costs & Fee
It goes without saying that purchasing a home is a costly endeavor. It could be one of your most significant purchases. But, don’t be alarmed; if you’re serious about purchasing a home, it all begins with small actions like saving.
Any small sum you come across should be saved. Because, at the end of the day, buying a house costs a lot of money, from the down payment to the closing costs, legal expenses, and so on.
Step 4: Choose your mortgage rate type and term
As soon as your down payment situation is settled, what’s next is to shop around for a mortgage lender with suitable terms and rates. You can either get a mortgage loan from a mortgage lender or a mortgage broker. How a mortgage lender lends money differs from how a mortgage broker. Make sure to carefully go over their terms and rates before choosing to work with them. A great move would be to hire an experienced mortgage lawyer who can review your terms to check for suspicious clauses.
To find the best mortgage lender for your needs, talk with several lenders about their products. Some great questions to ask yourself when seeking a mortgage lender includes:
- How long do you want the mortgage to be?
- What type of mortgage do you need?
- Do you want a mortgage with a rise or fall interest rate or one that is fixed?
- How often do you want to make a repayment on the mortgage?
Step 5: Get pre-approved for a mortgage
After finding the ideal mortgage broker or lender, what’s next is to organize your documentation to submit a mortgage application. Getting a pre-approval for a mortgage gives you peace of mind knowing you can confidently bid on houses you like. Getting pre-approved also means the lender has determined the mortgage amount you would qualify for so that you can have that price range in mind when house hunting. Typically, you will be asked to present several documents like your bank account or investment statement, proof of assets, proof of income, information about your debt, your identification, and so on. A pre-approval for a mortgage tells you the following:
- The mortgage interest rate available to you
- Your maximum monthly mortgage repayment plan
- The amount you can afford to spend on a house
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Step 6: Begin house hunting
There are several things to consider before going house hunting in British Columbia. You may also need to ascertain how the occupants of your house or family will be affected by your choice of location and size of the house. Usually, families would look at places in close proximity to schools, parks, and other amenities, but that is not all. To determine where and what type of house to purchase, you should also look at the cost of utilities, your pre-approved mortgage, facilities available in the neighborhood, property taxes compared to other locations, and available public services. You can contact a real estate agent or house hunt yourself. When searching for houses in Ontario to buy, consider the following locations:
Popular Cities & Neighborhoods in British Columbia
VANCOUVER BC: Vancouver is undoubtedly the most well-known city in British Columbia and is consistently named for its livability and quality of life. It boasts some of the most amazing natural and architectural features that make it a great place to buy a house.
SURREY BC: Surrey is a great place to live if you have a family and need a place with enough amenities for quality living. The city is constantly growing so there are many new developing areas to move to within the city.
NANAIMO BC: Also known as the harbor city, Nanaimo is a great city with tons of affordable housing and outdoor activities that make it worth your consideration.
WHISTLER BC: Known for its Ski resorts and outdoor fun activities, Whistler offers plenty of opportunities for people looking to settle down and call the town a home.
BURNABY BC: Burnaby is a beautiful town with lots of parks, mountains and freshwater lake that is perfect for people looking to connect with nature. It provides standard amenities that make it a great environment to live comfortably.
Helpful home buying resources in British Columbia
Home buying resources potentially ease the stress and challenges of buying a house in British Columbia. These resources are generally provided by the government to help citizens reduce cost such as property tax and purchase a house with some financial assistance. Two of such resources are the First Time Home Buyers Program for the province of British Columbia and CMHC.ca
Step 7: Make an offer on a house
When you find the house you want to buy, things move rapidly from there, but don’t get too worked up. The first thing you should do is make an offer on the house. Move on to finalizing your mortgage plan as soon as your offer is approved.
Step 8: Close on your new British Columbia home
Before you pay for the house you want to buy in British Columbia, request a home inspection; after the inspection, the house’s purchase price can change depending on the finding in the house inspection. Contact your real estate lawyer as you may make a down payment and transfer the title of ownership. The entire process shouldn’t take more than 30 to 60 days.
First-Time Home Buying Resources in British Columbia
First-time homebuyers in British Columbia who need some form of financial assistance can leverage these resources. This program reduces or eliminates the amount you pay on property transfer tax when you purchase your first home.
Some available FTHB resources in British Columbia include the Home Buyers Plan (HBP), New Housing GST/HST Rebate, Home Buyers’ Tax Credit, Property Transfer Tax which allows you to access various incentives and savings opportunities.
While buying a house may be a new experience, you should not get overwhelmed by all that’s involved and patiently plan ahead. Your planning stage could include building your credit score, saving for the down payment, and taking all the necessary steps to get pre-approved before starting your house search. Above all, once you’ve met all readiness parameters, finding a suitable house shouldn’t be much of a problem, plus a real estate agent can help make the entire process seamless.
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