Everything You Need to Know About Buying Your First Home in Canada


December 7, 2022

Everything You Need to Know About Buying Your First Home in Canada - Featured Image

Moving to Canada has been your dream, and while it’s incredibly exciting to finally get your chance, you know that it’s going to be a big process. Getting your permanent residence or citizenship can take some time, and it’s a big drain on your finances. 

When you first move to Canada, you’ll usually end up renting at first. Rental units are affordable and easy to find. This also gives you a chance to feel comfortable in your new surroundings before you spend a lot of money on a house. 

Eventually, though, you’ll want to put down some roots and buy a place that’s a bit more permanent. 

While you don’t want to rush into a decision before you’re truly ready, it’s smart to buy a home as soon as possible. This allows you to start building equity right away while you establish yourself in the community. 

This guide will help you navigate through this important step in your life by showing you what you need to know about buying your first home in Canada.

If you’d like to get a PDF of this article to take with you to keep handy for reference, simply fill out the form below and we’ll send it right to your inbox:

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What Can You Afford?

It’s important to understand how mortgages work in Canada so that you’re sure to get a home that’s in your price range.

First off, mortgage lenders typically define affordability as a monthly mortgage payment that’s less than 30 percent of your monthly income. For example, if your combined family income is $6,000 per month, you’ll need to make mortgage payments that are $2,000 or less. It’s also important to note that your mortgage payment consists of several things:

  • Payment toward the principal balance
  • Payment toward insurance
  • Mortgage insurance premiums (if you put less than 20 percent down)
  • One-twelfth of the annual homeowner’s insurance premium
  • One-twelfth of the annual property tax amount.

Additionally, you will have several other expenses you need to manage as a homeowner. These things will include:

  • Electricity and heating
  • Garbage removal
  • Water
  • Internet services
  • Maintenance and repairs
  • House cleaning/landscaping fees (if you hire this work out)

These lists shouldn’t frighten you – it’s simply to get a full picture of the areas of expenses you can incur as a homeowner. By taking these into account, you can better determine what’s a good fit for your family. Many first-time homebuyers choose to purchase a home that’s below the maximum amount the bank will lend. This helps them stay on track with their budget and helps ensure they don’t become “house poor.”

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What Type of Home Is Right for You?

Along with affordability, you need to think about what type of home is going to fit your needs.

Start by focusing on the size of the home. If you’re a young couple with one child or a retired couple whose children have moved on, you can save money by getting a smaller place. If you have several children or plan to live as a multigenerational family, it’s pretty likely you want to look for a larger home. 

You’ll also need to think about what types of features you want in your home. For instance, some families like a separate spice kitchen for cooking certain foods. Other families want a large space for entertaining, a home office, a second-floor laundry, or an in-law suite in the basement for their parents. These types of things are all available in Canadian homes. You just need to find the right one for you.

These are some of the home styles that new Canadians should take a closer look at:

Condominiums

Condominiums – or “condos” – are apartment-style homes. You’ll find several condos in the same building, and you typically own only the condo itself, not the land that it’s built on. Condos are usually the most affordable options and they’re an especially good choice for anyone who doesn’t want to worry about exterior maintenance.

This type of home is a favourite for first-time homebuyers looking to get into real estate. Retirees and downsizers also love them, as do real estate investors. 

Something to plan for? The condo fees. These are meant to pay for maintenance of the shared spaces, like hallways and elevators. Some condos building even have special features like gym space or pools.

Townhomes

Townhomes are built in rows, sharing walls with each other. They are usually two or three-storey homes with a main living area on one floor and bedrooms on another floor. While a townhome rarely has a large backyard, many do include balconies or patios for some outdoor space. Townhomes are generally quite affordable and appeal to those who don’t want to worry about the costs and maintenance that came come with a larger home.

Townhomes are great for couples or a small family who don’t need a lot of space but still want to have that homey feeling.

Duplex Homes

Duplex homes are two large, family homes built side-by-side with one connecting wall. They’re slightly more affordable than a typical single family home, and usually have a backyard space with an attached garage. Because they share a wall with the next-door home, duplex homes aren’t fully private, but modern building practices give you as much soundproofing as possible. 

Duplex homes are especially appealing to multigenerational families who want to be close but with separate living spaces. Parents can buy one side of the home and their adult children can move in right next door.

Single Family Homes (Laned and Front-Attached)

Single family homes are designed for either a small or large family. They’re not connected to any other properties, and they usually have a large backyard or front yard that’s perfect for hosting barbecues or letting the kids play. These are the biggest style of home, and you can easily get one with 1,800 square feet or more. 

Front-attached homes have the garage attached to the front of the home, which is a big convenience in Canada’s cold winters. Laned homes have a “cute” look from the front, with a parking pad or detached garage in the back.

These types of homes are appealing to those who want a lot of space for their families.

If you’re not familiar with all of these home styles, the best thing to do is to tour the different styles. This gives you a good sense of what’s out there, how much each style will cost, and what kind of home is right for you.

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Working with a Realtor® or Home Builder

When you buy your home, it’s helpful to have someone guiding the process with you. If you’re buying a brand-new home, that person is likely to be the builder or the Area Manager. If you’re buying a resale home, you’ll want to work with a Realtor®.

Area Managers will first help you find the right neighbourhood for you to build your home in. They’re very familiar with the entire Edmonton area. This means they can point you to areas that will give you an easy commute, have nearby specialty stores that have foods from your home country, and have great schools for your kids. They’ll also be able to help you work within your budget, giving you the best chance to get everything you want in a home at a price you can afford.

Real estate agents are the masters of resale homes. They can help you find a home within your budget and includes all of the major things you’re looking for. Once you find one you like, they can then help you make an offer on the home. With their knowledge and expertise, you’ll feel confident knowing  you’re getting the best deal. The downside is someone has to pay the commission fee, but this is usually part of the final purchase price and generally it’s the seller who covers it.

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What Do You Need To Get Started?

Once you start thinking about buying your home, it’s time to get prepared. Mostly, this means getting your finances in order. In this section, we’ll talk about a few of the things you’ll need to get ready.

A Good Credit Score

Newcomers to Canada might have an excellent credit score in their home countries, but they don’t yet have credit in Canada. This makes it hard to get a home loan. As soon as you move to Canada, you’ll want to apply for a credit card and start using it to build up your credit. Many large banks have special programs to help newcomers get on their feet financially, so check out those out.

Down Payment Savings

To buy a home, you need to have a down payment. This is an amount of money that’s equal to at least 5 percent of the value of the home. However, having 20 percent of the home’s value for your down payment is the best move. This will make it easier for you to get a mortgage, and you won’t have to pay for mortgage insurance.

Emergency Savings

Once you own a home, it becomes even more important to have emergency savings. This money should equal at least six months’ worth of your income and/or living expenses. It should cover you in case of an unexpected income loss. You will also need it for any unexpected repairs you need to make, although with a new build home you don’t have these worries. Plus, you’ll have a new home warranty to cover anything that may come up!

Closing Costs

When you finalize your purchase, you need to have money for the closing costs. These include things like taxes, legal fees, and other items. Your home builder or Realtor® can give you an estimate of how much you’ll need for this, but we generally recommend having between two and six percent of the cost of the home to cover these.

While you can buy a home in Canada without being a permanent resident or a citizen at all, it’s usually better to have at least permanent residence established before you buy. This will make it possible to qualify for a mortgage, and if there’s ever a problem with the application for living in Canada, you don’t want to have to take care of a property here if you need to remain in your home country while things get straightened out.

How Does The Home Buying Process Work?

As we mentioned before, you need to work towards building up your Canadian credit score so you can be approved for a loan. Once you have a good score and you have a down payment saved, you’ll be ready to buy your home.

Start by getting a mortgage pre-approval. During this process, the mortgage lender will verify your credit score and income levels, then tell you how much they’re willing to lend you and at what interest rate. This allows you to crunch some real numbers to see how much your monthly payment will be. 

At this point, you may find you need to save up a bit more for your down payment than you originally planned on so you can lower those monthly payments. Or you might find out that you have more than enough money to get the home of your dreams.

You’ll then shop for that perfect home using either a Realtor® or a working with a home builder. Once you find the home you want, make an offer on it. If you’re buying a resale home, the seller has to accept your offer. With a brand-new home, the builder tells you how much it will cost to build the home with the features you want.

When everything is all done, you show up for closing day, sign the final paperwork, hand over the money and fees you need to pay and get the keys to your new home!

Of course, this is a simplified version of what’s going to happen, but while you’re in the middle of the process, there will be people who can help you.

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What Are The Benefits Of Buying A Home Right Away?

It’s smart to wait until you’re ready to buy a home, but you don’t want to make the mistake of waiting too long. In many cases, it’s better to buy a home sooner rather than later.

The major reason for this is the opportunity to build up equity. Every month you pay rent, it goes to your landlord. That rent payment doesn’t help you at all. But when you’re making a mortgage payment, your monthly payment goes toward building up equity. If you ever sell your home, you’ll get that money back – and you may even make money on your sale. You can also later take out a home equity line of credit to pay for something you might need. Having equity is a big benefit to you.

Additionally, the earlier you start making payments toward a home, the sooner you’ll be finished with paying off your mortgage. Most people take out a mortgage for 25 years, so if you wait too long, you may be stuck in a place where you want to retire but can’t because you’re still paying off the mortgage.

Buying your first home in a new country can seem overwhelming at first glance, but once you start to learn the rules you can break it down into a series of steps that will make the home buying process much easier. 

The sooner you start on your home buying journey, the more time and money you could save.

We know the home buying process inside and out, so feel free to get in touch and see how we can help you get into your first Canadian home. 

Click here to download Everything You Need to Know About Buying Your First Home in Canada now

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About the Author:


At Sterling Homes, our mission is to provide the opportunity for affordable homeownership without compromise. Over the last 70 years, Sterling Edmonton has quickly become one of Edmonton’s most popular builders. We bring more than seven decades worth of exceptional customer service, superior design and unparalleled craftsmanship to the greater Edmonton area. As a member of the Qualico Group, Sterling Homes focuses on greater Edmonton’s finest family communities, while being able to offer some of the region’s most family friendly prices thanks to volume purchasing power for materials, trades and land. This has not only made Sterling one of Edmonton’s bestselling, move-up builders, but also one of the industry’s most respected home providers. It is through our uncompromising commitment to our customers that we proudly deliver the Sterling Advantage – that’s why each and every home we build includes a 10-year home warranty, a completion guarantee and new home warranty excellence rating. Our Advantage is our pledge that, when you build your dream home with Sterling, we will deliver a timely, well-built home you’re sure to enjoy for years to come.

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