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Homebuying Step by Step

Our Homebuying Steps guide is here to make things easier for you by providing the information you need to make a wise homebuying decision. This section provides examples and worksheets that will guide you through the entire homebuying process, from the moment you make the decision to buy your own home to the moment the movers carry the first box through the front door. It couldn’t be easier!

Homebuying Steps

Step 1 — Is Homeownership Right for You?

Is Homeownership Right for You?

Homebuying Steps step1_01Buying a home is one of the biggest emotional and financial decisions you’ll ever make, so prepare yourself to make a knowledgeable decision.

Although buying a home almost always seems like a great idea, it is important to understand what homeownership involves. Of course, being a homeowner is something to be proud of but it also means having to invest money, time and energy and take on added responsibilities. So, before you decide to buy a home, make sure you’re ready.

Here are some things to consider:

  • Financial Security. If housing prices rise, your home can provide you with some financial security due to capital appreciation.
  • Stability. Having a place of your own.
  • Financial Stress. Coming up with the down payment, meeting regular mortgage payments and other ongoing costs will tie up a lot of your cash, and can put considerable stress on your finances.
  • Maintenance. Keeping your home in good shape requires time and money.
  • Responsibility. You alone are responsible for payments, repairs and maintenance.
  • Flexibility. You can decorate or renovate your home to meet your own family’s personal tastes and needs.

Now that you have an idea of what to expect, make a list with the following criteria to help you determine if homeownership is right for you:

  • Advantages of Renting:
  • Disadvantages of Renting:
  • Advantages of Buying:
  • Disadvantages of Buying:

Here are some questions to consider:

  1. Are you fairly certain you will not move to another community in the future?
  2. Do you expect your income to remain the same or increase in the future?
  3. Can you handle the financial responsibility of a mortgage?
  4. Do you want to take care of home repairs and improvements?
  5. Based on your assessment of advantages and disadvantages, and your answers to the questions, is buying a home the best choice for you?

Step 2 — Are You Financially Ready?

Are You Financially Ready?

Homebuying Steps step2_01So, you’ve decided that homeownership is right for you. Now you need to determine if you are financially ready to buy a house. In this Step, you will find a number of simple calculations that you can do to evaluate your current financial situation, how much house you can afford and the maximum home price that you should be considering.

To avoid any future surprises, you can do some financial exercises to see where you stand. They include calculating your net worth, determining your current monthly expenses and what your current monthly debt payments are.

Knowing your net worth is important because you will need this information when you discuss a mortgage with us. Your net worth is the amount left over once you’ve subtracted your total liabilities from your total assets. It will also give you a snapshot of your current financial situation and show you how much you can afford to put as a down payment.

How Much Can You Afford?

Now that you have a clear picture of your current financial situation, it’s time to find out what you can afford in monthly housing costs. Lenders follow two simple affordability rules to determine how much you can pay.

The first affordability rule is that your monthly housing costs shouldn’t be more than 32-35% of your gross household monthly income. Housing costs include monthly mortgage principal and interest, taxes and heating expenses — known as P.I.T.H. for short. For a condominium, P.I.T.H. also includes half of the monthly condominium fees. For leasehold tenure, P.I.T.H. includes the entire annual site lease.

Lenders add up these housing costs to determine what percentage they are of your gross monthly income. This figure is known as your Gross Debt Service (GDS) ratio. Remember, it must be 32-35% or less of your gross household monthly income.

The second affordability rule is that your entire monthly debt load shouldn’t be more than 42% of your gross monthly income. This includes housing costs and other debts, such as car loans and credit card payments. Lenders add up these debts to determine what percentage they are of your gross household monthly income. This figure is your Total Debt Service (TDS) ratio.

Your Maximum Home Price

The maximum home price that you can afford depends on a number of factors but the most important are your gross household income, your down payment and the mortgage interest rate.

This table gives you an idea of the maximum home price you can afford.

Income, Home Price and Down Payment Guide
Homebuying Steps step2_02

For most people the hardest part of buying a home – especially the first one – is saving the necessary down payment. Many people will not have 20% of the purchase price to put down. With mortgage loan insurance, you can purchase a home with as little as Zero down payment. Mortgage loan insurance protects the lender and, by law, most Canadian lending institutions require it. The way it works is if the borrower defaults (fails to pay) on the mortgage, the lender is paid back by the insurer. The cost for this type of insurance is in the form of a premium and can be paid in a single lump sum or it can be added to your mortgage and included in your monthly payments.

Most mortgage loan insurance products require homebuyers to provide the down payment from their own resources, such as savings and RRSPs. Gift down payments from immediate relatives are also acceptable. Mortgage Results also has a Zero down Program still available

For down payments of less then 10%, CMHC enables lenders to offer homebuyers the flexibility to use additional sources of down payment such as borrowed funds or gifts from immediate family members.

Loan-to-Value
Premium on Total LoanPremium on Increase to Loan Amount for Portability
Up to and including 65%0.60%0.60%
Up to and including 75%1.70%5.90%
Up to and including 80%2.40%6.05%
Up to and including 85%2.80%6.20%
Up to and including 90%3.10%6.25%
Up to and including 95%4.00%6.30%
90.01% to 95% —
Non-Traditional Down Payment**
4.50%6.60 %

Premiums in Manitoba, Ontario and Quebec are subject to provincial sales tax. The provincial sales tax cannot be added to the loan amount.

 

Other important factors to consider when determining your maximum home price are your personal preferences and your calculations from earlier on in Step 2.

Get a Mortgage Pre-Approval

Homebuying Steps step2_04Once you’ve made the necessary calculations and feel that you are ready to obtain a mortgage, it’s a good idea to select a lender to get pre-approved. This means that the lender will look at your finances to establish the amount of mortgage you can afford. At that time, the lender will give you a written confirmation or certificate for a fixed interest rate good for a specific period of time.

Some buyers may not wish to pursue a mortgage pre-approval until they have found the home they want to buy. However, having a pre-approved mortgage amount makes the search for your new home much easier and less time-consuming because you have a good price range in mind.

Some of the things you will need to have with you the first time you meet with us are:

  • Your personal information, including identification such as your driver’s license
  • Details on your job, including confirmation of salary in the form of a letter from your employer
  • Your sources of income
  • Information and details on all bank accounts, loans and other debts
  • List of financial assets
  • Source and amount of down payment and deposit
  • Proof of source of funds for the closing costs (1.5% of the purchase price)
Will You Have Trouble Qualifying for a Mortgage?

Homebuying Steps step2_05Your calculations may show that you will have trouble meeting monthly debt payment and that you will likely have trouble getting approved for a mortgage. Here are some things you can do:

  • Pay off some loans first
  • Save for a larger down payment
  • Revise your target house price
Other Helpful Strategies
  • Meet with a credit counsellor who can help you minimize your debts.
  • Buy your home through a rent-to-own program provided by the builder, a non-profit sponsor or a government sponsor.
  • Find out about programs through which you can help build your own home.
  • Ask the housing department of your municipality about any special programs available.
The Importance of Your Credit Rating

Before approving you for a mortgage, lenders will want to see how well you have paid your debts and bills in the past. To do this, they simply get a copy of your credit history (credit report) from a credit bureau. This provides them with information on your financial past and use of credit. Before your lender sees your credit history, you should get a copy for yourself to make sure the information is complete and accurate. Simply contact one of the two main credit-reporting agencies (Equifax Canada Inc. or TransUnion of Canada) to get a copy of your credit report. There is often a fee for this service.

Lack of Credit History

Homebuying Steps step2_06If you have no credit history, it is important to start building one by, for example, applying for a standard credit card with good interest rates and terms, making small purchases and paying them as soon as the bill comes in.

Fixing a Credit Record

If you have bad credit, lenders might not want to give you a mortgage loan until you can re-establish a good credit history by making debt payments regularly and on time. Most unfavourable credit information, including bankruptcy, is dropped from your credit file after seven years. If you have bad credit, you may want to consider credit counselling.

Despite your poor credit history, you might still be able to get a mortgage loan if you have a relative such as a family member willing to be a guarantor or co-signer on the loan. This person must meet the lender’s borrowing criteria, including good credit history, and is legally obligated to make the mortgage payments if you do not.

Basically we will sit down with you at Mortgage Results and have a look at the big picture, we have a proven track record of getting the job done!

Step 3 — How Much Will It Really Cost?

How Much Will It Really Cost?

Once you have figured out the home price range you can afford and the type of mortgage you qualify for, you will need to calculate all of the associated costs of the transaction to make sure you are financially ready.

Upfront Costs

You will need to plan ahead to cover the many up-front costs of buying a home. Timing is important to help make sure things go smoothly.

  • Mortgage Loan Insurance Premium. If yours is a high-ratio mortgage (less than 20% down payment), your lender may need mortgage loan insurance. Your lender may add the mortgage insurance premium to your mortgage or ask you to pay it in full upon closing. (Refer to Step 2 for details)
  • Appraisal Fee. Your mortgage lender may require that the property be appraised at your expense. An appraisal is an estimate of the value of the home. The cost is usually between $250 and $350 and must be paid when you contract for those services. (Refer to Step 5 for details.)
  • Deposit. This is part of your down payment and must be paid when you make an Offer to Purchase. The cost varies depending on the area, but it may be up to 5% of the purchase price. If you wish to make a down payment of 5% and you give a deposit of 5%, then your down payment is considered to be made.
  • Down Payment. With mortgage loan insurance from CMHC you can own your home with as little as 5% down payment. At least 20% of the purchase price is usually required for a conventional mortgage.
  • Estoppel Certificate Fee (does not apply in Quebec). This applies if you are buying a condominium or strata unit and could cost up to $100.
  • Home Inspection Fee. CMHC recommends that you make a home inspection a condition of your Offer to Purchase. A home inspection is a report on the condition of the home and generally costs around $500, depending on the complexities of the inspection. For example, it may be more costly to inspect a large home or one where issues such as moisture problems, pyrite, radon gas or urea-formaldehyde are suspected. (Refer to Step 5 for details.)
  • Land Registration Fees (sometimes called a Land Transfer Tax, Deed Registration Fee, Tariff or Property Purchases Tax). You may have to pay this provincial or municipal charge upon closing in some provinces and territories. The cost is a percentage of the property’s purchase price and may vary. Check with your lawyer/notary to see what the current rates are.
  • Prepaid Property Taxes and/or Utility Bills. To reimburse the vendor for prepaid costs such as property taxes, filling the oil tank and so on.
  • Property Insurance. The mortgage lender requires this because the home is security for the mortgage. This insurance covers the cost of replacing your home and its contents. Property insurance must be in place on closing day. (Refer to Step 5 for details.)
  • Survey or Certificate of Location Cost. The mortgage lender may ask for an up-to-date survey or certificate of location prior to finalizing the mortgage loan. If the seller does not have one or does not agree to get one, you will have to pay for it yourself. It can cost in the $1,000 to $2,000 range.
  • Water Tests. If the home has a well, you will want to have the quality of the water tested to ensure that the water supply is adequate and the water is potable. You can negotiate these costs with the vendor and list them in your Offer to Purchase.
  • Septic tank. If the house has a septic tank, it should be checked to make sure it is in good working order. You can negotiate the cost with the vendor and list it in your Offer to Purchase.
  • Legal Fees and Disbursements. Must be paid upon closing and cost a minimum of $500 (plus GST/HST).Your lawyer/notary will also bill you direct costs to check on the legal status of your property. (Refer to Step 5 for details.)
  • Title Insurance. Your lender or lawyer/notary may suggest title insurance to cover loss caused by defects of title to the property.

If you feel you cannot cover all of the up-front costs, you can ask your lender for a loan. Remember that payment for this loan amount, based on a 12-month repayment period, will have to be included in your Total Debt Service ratio calculation.

Other Costs

Besides up-front costs, there are other expenses to consider:

  • Appliances. Check to see what comes with the house, if anything.
  • Gardening equipment.
  • Snow-clearing equipment.
  • Window treatments. Check to see what comes with the house.
  • Decorating materials. Paint, wallpaper, flooring and tools for redecorating.
  • Hand tools. You will need some basic hand tools for your new home.
  • Dehumidifier. May be required to control moisture levels, especially in older homes.
  • Moving Expenses.
  • Renovations or Repairs.
  • Service connection fees. Charged for utilities — telephone, gas, electricity, cable TV, satellite TV, Internet and so on. You may be asked to pay a deposit for some utilities.
  • Condominium Fees. You may have to make the initial payment for these monthly fees.

Step 4 — What Should You Buy?

What Should You Buy?

Your Current and Future Needs

Before you start searching for a home, you need to think about your needs both now and in the future. Here are some things to consider:

  • Size requirements. Do you need several bedrooms, more than one bathroom, space for a home office, a two-car garage?
  • Special features. Do you want air conditioning, storage or hobby space, a fireplace, a swimming pool? Do you have family members with special needs? Do you want special features to save energy, enhance indoor air quality and reduce environmental impact?
  • Lifestyles and stages. Do you plan to have children? Do you have teenagers who will be moving away soon? Are you close to retirement? Will you need a home that can accommodate different stages of life?

Try to buy a home that meets most of your needs for the next 5 to 10 years, or find a home that can grow and change with your needs. Use the worksheetHome Features Checklist to see what you want, need and may potentially need in the future.

Choosing a Location That Is Right for You

Even if the home you choose has everything you need, the location might not be appropriate. When deciding where to live, you should consider:

  • Whether you want to live in a city, a town or in the countryside
  • Where you work, how easy it will be to get there and the commuting costs
  • Where your children will attend school and how they will get there
  • Whether you need a safe walking area or recreational facilities such as a park nearby
  • How close you would like to be to family and friends

New Home, Previously Owned or Build Your Own?

When thinking about the kind of home you want, the first thing you should consider is whether you want a previously owned home (often called a resale) or a new home. Here are some characteristics that may help you decide:

Homebuying Steps step4_01

New Home
  • Modern design. A new home has an up-to-date design that takes into account the latest trends, materials and features.
  • Personalized choices. You may be able to upgrade or choose certain items such as siding, flooring, cabinets, plumbing and electrical fixtures.
  • Up-to-date with the latest codes/standards. The latest building codes, electrical and energy-efficiency standards will be applied.
  • Maintenance costs. Lower maintenance costs because everything is new and many items are covered by a warranty. You should still set aside money every year for future maintenance costs.
  • Builder warranty. This is a warranty that may be provided by the builder of the home. Be sure to check all the conditions of the warranty. A homebuilder’s warranty can be important if a major system such as plumbing or heating breaks down.
  • New Home Warranty programs. Generally new home warranty programs are provided by provincial and territorial governments, but there are private new home warranty programs. These warranty programs are not available in Nunavut and the Northwest Territories. Check with your real estate agent or lawyer/notary to find out what the new home warranty program in your province or territory covers.
  • Neighbourhood amenities such as schools, shopping malls and other services may not be complete for years.
  • Taxes such as the Goods and Services Tax (GST) (or, in certain provinces, the Harmonized Sales Tax (HST)) will apply. However, you may qualify for a rebate of part of the GST or HST on homes that cost less than $450,000. For more information about the GST New Housing Rebate program, visit the Canada Revenue Agency website at, http://www.cra-arc.gc.ca.
  • Extra costs. You may have to pay extra if you want to add a fireplace, plant trees and sod, or pave your driveway. Make sure you know exactly what’s included in the price of your home.
Resale Home
  • You can see what you are buying. Easy access to services. Probably established in a neighbourhood with schools, shopping malls and other services.
  • Landscaping is usually done and fencing installed. Previously owned homes may have extras like fireplaces or finished basements or swimming pools.
  • No GST/HST. You don’t have to pay the GST/HST unless the house has been renovated substantially, and then the taxes are applied as if it were a new house.
  • Possible redecorating and renovations. You may need to redecorate, renovate or do major repairs such as replacing the roof, windows and doors.
Building Your Own Home

Some people prefer the challenge and flexibility of building their own home. On one hand, you make all the decisions about size, design, location, quality of material, level of energy-efficiency and so on. However, you should expect to invest lots of time and energy.

Deciding on the Type of Home to Buy

There are many types of homes to choose from and each has its advantages and disadvantages. Think about your needs before making a decision. Don’t forget to look beyond the walls. The environment surrounding your home can be almost as important as the environment inside of it.

Homebuying Steps step4_02

Single-family Detached
A home containing one dwelling unit, that stands alone and sits on its own lot thereby offering a greater degree of privacy.
Semi-detached
A single-family home that is joined to another one by a common wall. It can offer many of the advantages of a single-family detached home and is usually less expensive to buy and maintain.
Duplex
Two single-family homes located one above the other in a building. Often, the owner lives in one unit and rents the other.
Row House or Townhouse
Many similar single-family homes, side-by-side, separated by common walls. They can be freehold, condominiums, or rental units. They offer less privacy than a single-family detached home but still provide a separate outdoor space. These homes can cost less to buy and maintain — but they can also be large, luxury units.
Stacked Townhouse
Usually consists of two-storey homes stacked one on top of the other in a row of four or more homes. The units may have more than one level. All units have direct access from the outside.
Link or Carriage Home
Houses joined by garages or carports which provide access to the front and back yards. Builders sometimes join basement walls so that link houses appear to be single-family homes on small lots. These houses can be less expensive than single-family detached homes.
Manufactured Home
A factory-built single-family home that is transported to your chosen location and placed on a foundation. The term manufactured home has replaced the term “mobile home.”
Modular Home
Also a factory-built single-family home constructed in compliance with local building codes. The home is typically shipped to a location in two or more sections and placed on a foundation.
Condominium
A condominium is a form of ownership, not a type of construction. Condominiums can be high-rise residential buildings, townhouse complexes, individual houses and low-rise residential buildings. Condominiums are known as stratas in British Columbia and syndicates of co-ownership in Quebec.

Step 5 — What Professionals Should You Call On?

What Professionals Should You Call On?

Because purchasing a home is probably the biggest investment you will ever make, you’ll definitely want a team of professionals working with you throughout the process.

The Real Estate Agent

No one will play a more important role in helping you find a home than your real estate agent. Your real estate agent’s job is to:

  • Help you find the ideal home.
  • Write an Offer of Purchase.
  • Negotiate on your behalf to help you get the best possible deal.
  • Provide you with important information about the community, help you arrange and coordinate a home inspection and essentially save you time, trouble and money.

When the time comes to select a real estate agent, don’t be afraid to ask questions — especially about any possible service charges. Vendors normally pay a commission to the agent but some agents charge buyers a fee for their services.

If you would like to know more about a real estate agent’s ethical obligations, you can visit the Canadian Real Estate Association’s website at http://www.crea.ca or call your local real estate association.

The Lender or Mortgage Broker

This is where we come in, getting a mortgage pre-approval is a critical step in the process as the vendor then knows you are serious and will be in a better position to negotiate.

Some people find it helpful to use a mortgage broker. Mortgage brokers don’t work for any specific lending institution. Our role is to find the lender with the terms and rates that will best suit the buyer.

The Lawyer/Notary

You need a lawyer (or a notary in Quebec) to protect your legal interests, such as ensuring the property you are thinking of buying does not have any building or statutory liens or charges or work or clean-up orders associated with it. He or she will review all contracts before you sign them, especially the Offer (or Agreement) to Purchase. Having a lawyer/notary involved in the process will give you peace of mind and ensure that things go as smoothly as possible. Law associations can refer you to lawyers who specialize in real estate law.

Lawyer/notary fees depend on the complexity of the transaction and their experience. For instance, if you are buying a condominium, you will want a lawyer/notary experienced in condominium transactions. Shop around for rates and, when choosing your lawyer/notary.

Remember that a lawyer/notary:

  • Should be a licensed full-time lawyer/notary.
  • Should be local and understand real estate laws, regulations and restrictions.
  • Should have realistic and acceptable fees.
  • Should be able and willing to explain things in plain language.
  • Should be experienced with condominiums (if you are purchasing a condominium).

The Home Inspector

You should consider having any home you are thinking of buying — whether it is a resale home or a brand new home — inspected by a knowledgeable and professional inspector.

An inspection by a home inspector is a visual inspection.

The home inspector’s role is to inform you about the property’s condition. The home inspector will tell you if something is not functioning properly, needs to be changed or is unsafe. You will also be informed of repairs that need to be made and maybe even where there may have been problems in the past.

Every inspection should include a visual assessment of at least the following:

  • Foundation
  • Doors and windows
  • Roof and exterior walls
  • Attics
  • Plumbing and electrical systems (where visible)
  • Heating and air conditioning systems
  • Ceilings, walls and floors
  • Insulation (where visible)
  • Ventilation
  • Septic tanks, wells or sewer lines (if inspector is qualified)
  • Any other buildings such as a detached garage
  • The lot, including drainage away from buildings, slopes and natural vegetation
  • Overall opinion of structural integrity of the buildings
  • Common areas (in the case of a condominium/strata or co-operative)

There is presently no mandatory certification and no legislated requirements for home inspectors to take any courses or to have passed any tests. Anyone can say that they are a home inspector. However, a good home and property inspector generally belongs to a provincial or industry association. CMHC does not recommend or endorse any individual home inspector or association. CMHC supports national standards of competency for home inspectors. For more information about the home inspection industry’s voluntary National Certification Program, visit the National Certification Authority’s website at http://www.nca-anc.com/.

Home inspector fees are generally in the $500 range and depend on the size and condition of the home.

The Insurance Broker

An insurance broker can help you with your insurance needs, including property insurance and mortgage life insurance. Lenders insist on property insurance because your property is their security for your loan. Property insurance covers the replacement cost of your home, so premiums may vary depending on its value.

Your lender may also suggest that you buy mortgage life insurance. Mortgage life insurance provides coverage for your family if you die before your mortgage is paid off. This type of insurance is often available through your lender, who then simply adds the premium to your regular mortgage payments. However, you may want to compare rates between both an insurance broker and your lender.

Be careful not to confuse property or life insurance with mortgage loan insurance, which may be required for high-ratio mortgages. (Refer to Step 7 for more details.)

The Appraiser

Having an independent appraisal done on a property before you make an offer is a good idea. It will tell you what the property is worth and help ensure that you are not paying too much. Your lender can also ask for a recognized appraisal in order to complete a mortgage loan.

The appraisal should include an unbiased assessment of the property’s physical and functional characteristics, an analysis of recent comparable sales and an assessment of current market conditions affecting the property.

Appraisal fees may vary but you should not pay more than $300 – $500 in most areas for a typical single-family house.

We have appraisers signed up for this process.

The Land Surveyor

If the seller does not have a Survey or Certificate of Location, you will probably need to get one for your mortgage application. If the Survey in the seller’s possession is older than five years, it will probably need to be updated. Remember that you must have permission from the property owner before hiring a surveyor to go onto the property. Ask your real estate agent to help co-ordinate this with the owner.

The Builder/Contractor

If you are buying a newly constructed home, you will have to hire a builder or contractor. If the house you are buying needs renovations, you may also require a builder or contractor.

Here are some things to keep in mind when choosing a builder or contractor:

  • Ask for references and talk to other customers about the builder’s performance.
  • Check with the New Home Warranty program in the area (if applicable).
  • Visit other housing developments that the company has built.
  • Ask builders or contractors if they are members of a local homebuilders’ association or ask for a provincial license number.

If you are having a custom home built, remember that:

  • You may want to hire an architect to design the house, and supervise construction.
  • Builders of custom homes usually work on either a fixed-price or a cost-plus basis. Authorize any changes to your contract by writing your name or initials beside the change.

On a final note, make sure your contract is as specific as possible about construction details, right down to the brand name or model number of any finishes. Make sure that you initial any changes to your contract.

Step 6 — How Can You Find the Right Home?

How Can You Find the Right Home?

Start the Search

Homebuying Steps step6_01Once you figure out what you can afford to pay for a house and obtain a pre-qualified mortgage, you are ready to start your search. There are a variety of sources you can use to find the home that is right for you:

  • Word of mouth. By telling everyone you know that you are looking for a house, you might hear about homes that are just becoming available on the market.
  • Newspapers and real estate magazines. Check the new homes section in daily newspapers or look for the free real estate magazines available at newsstands, convenience stores and other outlets. These free publications feature pictures and brief descriptions of a variety of homes.
  • The Internet. Check out real estate websites, such as realtor.ca for information and pictures of a wide range of properties. This site allows you to narrow your search by location, price, number of bedrooms and other features.
  • “For Sale” signs. Drive around a neighbourhood that interests you and look for “For Sale” signs. This is a good way to find homes that are being sold by the owner.
  • Visit new development sites. If you are looking for a newly built home, this will allow you to see the different models available and to get information from builders.
  • Work with a real estate agent. For most buyers, a real estate agent is key to finding the right home.

Useful Tips for Your Search

  • Keep records. Whether you work with a real estate agent or search by yourself, it’s a good idea to visit lots of different homes before choosing one. To make sure you have all the information you need to compare homes, use the worksheetHome Hunting Worksheet. Don’t forget to consider the home’s energy rating, utility costs, property taxes and major repairs, as these will affect your monthly housing expenses. Ask to see copies of bills. You should also be ready to compromise. Chances are you won’t find a home that has everything you want.
  • Check out the existing financing on the property. It may be possible to take over a favourable existing mortgage from the vendor or even obtain a vendor take back mortgage in order to help close the deal.
  • Think twice. Even if a home seems perfect, go back and take a closer, more critical look at it. Visit on different days and times, chat with prospective neighbours and look beyond cosmetics.
  • Energy Rating. Many houses in Canada have an Energy Rating tag that describes the energy efficiency of the house. Usually, an energy-rated house has the rating posted on a sticker on the electrical panel. The energy rating of a house is given on a 0 – 100 scale. The higher the rating, the more energy-efficient the house is — and the less it costs to operate.

Step 7 — Ready to Buy?

Ready to Buy?

Making an Offer to Purchase

Homebuying Steps step7_01Once you have found the home you would like to purchase, you need to present the vendor with an Offer to Purchase or an Agreement of Purchase and Sale. As your home is probably your biggest investment, it would be wise to work with your real estate agent and/or a lawyer/notary in preparing your offer. Remember that the Offer to Purchase or Agreement of Purchase and Sale is a legal document and should be carefully prepared.

Any offer or agreement will typically include:

  • Your legal name, the name of the vendor and the legal civic address of the property.
  • The purchase price offered.
  • The chattels that will be included in the purchase price (for example, window coverings, appliances). Whatever items in or around the home that you think are included in the sale should be specifically stated in your offer.
  • The amount of deposit.
  • The closing day (date you take possession of the home) — usually 30 to 60 days from the date of agreement. It can also be 90 days or longer. Generally, an Offer to Purchase obliges the purchaser to take possession of the house and property on a certain date. As of the closing date, the purchaser is responsible for taxes, utilities, repairs and maintenance.
  • Request for a current land survey of the property.
  • Date when the offer becomes null and void — that is, it is invalid.
  • Any other conditions that go with the offer, including property inspection and approval of mortgage financing.

The process of making an offer, receiving a counter-offer and then revising it again is not uncommon.

The whole process can seem like a roller coaster ride — exciting, but stressful. It’s all part of making the deal work best for you and the vendor.

The diagram below outlines the entire process for you in detail.

Steps for the Offer to Purchase

Homebuying Steps step7_02

When you make an Offer to Purchase, your real estate agent or your lawyer/notary will most likely add certain conditions to it, making it a conditional offer. This means that the contract will only become final when the conditions are met. The following three conditions are generally standard in an Offer to Purchase, especially for first-time buyers:

  • A satisfactory home inspection report
  • A property appraisal
  • Lender approval of mortgage financing to finance the purchase

Once these requirements are met, the conditions are removed and the Offer to Purchase becomes final.

Home Inspection

It is always a good idea to have the home you are buying inspected by a knowledgeable and professional home inspector. The inspector will go through the property and perform a comprehensive visual inspection to assess the condition of the house and all of its systems. When you receive the home inspection report, you and your real estate agent will have to discuss whether the condition of the home warrants withdrawing your offer to purchase or how the required repairs may affect the sale price that was agreed upon. (Refer to Step 5 for details.)

A pre-delivery inspection (PDI) may be a requirement in closing the purchase of a newly built home. Be aware that pre-delivery inspections are fairly specialized and not all home inspectors have experience in this area. Note also, that some builders have policies concerning who may be present during the pre-delivery inspection so it’s best to inquire with the builder during the negotiation of the sales agreement whether or not this is possible.

New Home Warranty Programs

Generally new home warranty programs are provided by provincial and territorial governments, but there are private new home warranty programs. These warranty programs are not available in Nunavut and the Northwest Territories. Check with your real estate agent or lawyer/notary to find out what the new home warranty program in your province or territory covers.

Warranty coverage varies from one province and territory to another, but typically covers labour and materials for warrantable items in your new home for at least one year after completion. It is also intended to address structural defects for a minimum of five years, and up to 10 years with some extended coverage options. A dollar cap is common. Make sure that you know what is covered by the New Home Warranty program in your province or jurisdiction. Don’t confuse the builder’s warranty with the New Home Warranty. Before you sign a contract for a new home, contact your New Home Warranty Program office for a list of registered builders in your area. Contact information is provided at the end of this Step.

For Condominiums or Strata Units

To buy a resale condominium or strata unit, you will have to get a satisfactory Estoppel Certificate or Certificate Status (does not apply in Quebec). This should be included as a condition in the Offer to Purchase.

Mortgage Approval

A pre-approved mortgage certificate is not a guarantee of being approved for the mortgage loan. Even if you have a pre-approved mortgage certificate, you must still meet with us during the conditional offer period to get a final mortgage approval. To ensure that the process goes smoothly, make sure you bring:

  • A copy of the property listing; and
  • A copy of the signed Offer to Purchase
  • Income Verification

We will update/verify your financial information, and put together the information required to complete the mortgage application. We may require an appraisal and/or a survey. Title insurance may also be required. We will also inform you about the various types of mortgages, terms, interest rates, amortization periods and payment schedules available.

Depending on your down payment, you may have a conventional or high-ratio mortgage.

Conventional Mortgage

Homebuying Steps step7_03A conventional mortgage is a mortgage loan that does not exceed 80% of the lending value of the property. The lending value is typically the lesser of the property’s purchase price and market value. Your down payment is at least 20% of the purchase price or market value.

If you contribute less than 20% of the home price as a down payment you will typically need a high-ratio mortgage. This type of mortgage usually requires mortgage loan insurance, of which CMHC is a major provider. Your lender may add the mortgage insurance premium to your mortgage or ask you to pay it in full upon closing. (Refer to Step 2 for details.)

Fixed, Variable or Adjustable Interest Rate

Mortgage interest rates are either fixed, variable or adjustable. A fixed rate is a locked-in rate that will not increase for the term of the mortgage. A variable rate fluctuates based on market conditions while the mortgage payment remains unchanged. With an adjustable rate, both the interest rate and the mortgage payment vary based on market conditions.

Closed Mortgage

A closed mortgage may be a good choice if you’d like to have a fixed payment that will allow you to adjust your budget to your new lifestyle. However, closed mortgages are not flexible and there are often penalties or restrictive conditions attached to prepayments or additional lump sum payments. It may not be the best choice if you decide to move before the end of the term or if you want to benefit from a potential decrease of interest rates.

Open Mortgage

This type of mortgage is flexible and can usually be pre-paid by any lump sum or paid off at any time without penalty. An open mortgage can be a good choice if you plan to sell your home in the near future or to pre-pay with large lump sums. Most lenders will allow you to convert to a closed mortgage at any time, although you may have to pay a small fee.

Term

We will also tell you about the term options for the mortgage. This is the length of time that the agreed-upon mortgage contract conditions, including interest rate, will be fixed. It can vary from six months to 10 years. Choosing a longer term (for example, five years) gives you the chance to plan ahead and protects you from interest rate increases while you adjust to homeownership. Weigh your options carefully and don’t be afraid to ask us to work out the differences between a one, two, five-year or longer terms.

Amortization

This is the amount of time over which the entire debt will be repaid. Many mortgages are amortized over 25 years, but longer periods are available. The longer the amortization, the lower your scheduled mortgage payments, but the more interest you pay in the long run.

Payment Schedule

A mortgage loan is often repaid in regular payments, either monthly, biweekly or weekly. Payment schedules that are more frequent can save some interest costs by reducing the outstanding principal balance more quickly than with monthly payments. The more payments you make in a year, the lower the overall interest you have to pay on your mortgage.

Keep in mind that mortgages may have important payment features that can save you money and let you be mortgage-free sooner.

Once the Offer is Accepted

Once all the conditions of the offer are fulfilled or dropped, it is time to start thinking ahead and making arrangements:

  • Give notice to your landlord if you are renting.
  • Start looking at moving options — hiring a professional or doing it yourself.
  • Make necessary address changes (utilities, services, post office).
  • Arrange for property insurance.

An offer will usually include a clause that allows the buyer to revisit the property a couple of times before closing (after all the conditions are fulfilled) so that he/she can:

  • Measure for window treatments.
  • Measure for special-sized furnishings.
  • Bring in a tradesperson for a renovation or remodelling estimate.

Arrange for these visits in advance to make sure your real estate agent is available.

New Home Warranty Programs

Provincial Programs
British Columbia
See the Homeowner Protection Office at www.hpo.bc.ca for the most up-to-date list of warranty programs. These include:
Lombard Canada New Home Warranty Program: www.lombard.ca

Travelers Guarantee Company of Canada (formerly London Guarantee Insurance Company): www.travelersguarantee.com

National Warranty Program Ltd.: (includes Royal and Sun Alliance) www.nationalhomewarranty.com

Pacific Home Warranty Insurance Services Inc. (Echelon General Insurance Company): www.pacificwarranty.com

Willis Canada Ltd (Commonwealth Insurance): www.williswarranty.com

Alberta
Progressive New Home Warranty Program (Echelon General Insurance Company): www.progressivewarranty.com

National Home Warranty Program Ltd.: www.nationalhomewarranty.com

New Home Warranty Program of Alberta: www.anhwp.com

Blanket Home Warranty Ltd.: www.blankethomewarranty.ca

Saskatchewan
Progressive New Home Warranty Program (Echelon General Insurance Company): www.progressivewarranty.com

National Home Warranty Program Ltd.: www.nationalhomewarranty.com

New Home Warranty Program of Saskatchewan: www.nhwp.org

Blanket Home Warranty Ltd.: www.blankethomewarranty.ca

Manitoba
Progressive New Home Warranty Program (Echelon General Insurance Company): www.progressivewarranty.com
National Home Warranty Program Ltd.: www.nationalhomewarranty.com

New Home Warranty Program of Manitoba: www.mbnhwp.com

Blanket Home Warranty Ltd.: www.blankethomewarranty.ca

Ontario
Tarion Warranty Corporation: www.tarion.com

Quebec
Garantie des maisons neuves de l’APCHQ: www.gomaison.com

Garantie des maisons neuves de l’ACQ: www.acq.org

La garantie des maîtres bâtisseur: www.maitresbatisseurs.com

New Brunswick, Nova Scotia,
Prince Edward Island,
Newfoundland and Labrador

Atlantic Home Warranty Program: www.ahwp.org

Lux Residential Warranty Program: www.luxrwp.com

Progressive New Home Warranty Program (Echelon General Insurance Co.): www.progressivewarranty.com

Step 8 — The Final Steps

The Final Steps

Closing Day

Homebuying Steps step8_01Closing day is the day when you finally achieve your goal — you take legal possession and finally get to call the house your own.

You are sure to feel great relief and satisfaction but remember that the homebuying process isn’t over just yet. There are quite a few things that need to be done on closing day:

  • Your lender will provide the mortgage money to your lawyer/notary.
  • You must provide the balance of the purchase price to your lawyer/notary along with the closing costs.
  • Your lawyer/notary pays the vendor, registers the home in your name and gives you the deed and the keys to your new home.

Hiring a Mover

It is now time to hire a mover. Friends or relatives may be able to recommend a professional moving company but don’t forget to ask the mover for references. You will also want an estimate and outline of fees (flat rate or hourly charge, etc.). Once you’ve selected a mover, it is a good idea to have the representative come to your home to see what will be moved and revise the estimate if necessary.

During the move, you’ll want to ensure that your belongings are insured. Your home or property insurance may cover goods in transit but call your broker or insurance company to be safe and to ask about the extent of coverage. Many moving companies offer additional insurance coverage. Be aware that professional movers are not responsible for items such as jewelry, currency or important papers. You will have to move these yourself.

If you decide to do your own packing, keep in mind that you will need the proper materials and that packing can take up a lot of time.

The Big Day

On moving day, go through the house with the van supervisor and provide any special instructions. The supervisor will also make note of the condition of your goods on an inventory list. Go through the house with the supervisor to make sure the list is complete and accurate. Then, when the van arrives at your new home, mark off the items on the mover’s list as they are unloaded. Remember that even if the movers unload and unpack boxes and remove packing materials, they will not put dishes or linens into cupboards.

Saying goodbye to one home and neighbourhood and discovering a new one can be very exciting. Just make sure it is not hectic as well. Plan ahead to make the transition as smooth as possible for everyone involved. That way, you can breathe easy and enjoy your new home without having to worry so much.

Step 9 — Is There More to Homebuying?

Is There More to Homebuying?

Finding and purchasing your home can be exciting — and overwhelming. You may be relieved once you finally take possession of your new house but be aware that the financial responsibilities of homeownership are just beginning.

Make Your Mortgage Payments on Time

Homebuying Steps step9_01Whether monthly, biweekly or weekly, be sure that you always make your mortgage payments on time. Making late payments (delinquency) may result in late charges and negatively affect your credit rating. Failing to make payments can even lead to more serious consequences like foreclosure.

A good way to prevent late payments is to have the amount automatically deducted from your account every month and to put at least three months’ worth of mortgage payments in savings for emergency situations. If you are having trouble making payments, discuss the situation with your lender.

Costs of Operating a Home

Besides your mortgage, property taxes and insurance, there are many other ongoing costs related to operating your home. They include maintenance and repair, costs for services such as a security alarm, snow removal and gardening (if you wish to pay for these). If you have a condominium or strata, some of these expenses may be included as part of your monthly maintenance fee.

Saving for Emergencies

Even if you know how to do repairs yourself, there are costs involved. Every building has a life cycle, which means that all parts of a building age and require major repairs or replacement at some point. For example, you might know that your roof will have to be replaced in a few years simply because of its age. Repairs like these are expected and can be planned for. However, many repairs are unexpected and can sometimes be costly.

Set aside an emergency fund to deal with unexpected problems ranging from major repairs to illness and job loss. A good guideline is saving 5% of your take-home pay and putting it in a special account.

Living Within Your Budget

Prepare a monthly budget and stick to it. You should monitor your spending every month and evaluate your progress in meeting your financial goals. If you continue to spend more than you are bringing in, you must find ways to cut back. If you are having trouble sticking to your budget, don’t hesitate to ask a professional money manager for help.

Step 10 — Tips on Home Repair and Maintenance

Tips on Home Repair and Maintenance

Once you’ve finally settled in, you may start to view your home with a more objective eye. Perhaps there are things you’d like to change — the kitchen cabinets or the flooring, for instance. Perhaps there are things that require repair or replacement, such as the plumbing or the windows. You will soon realize that maintenance, repair and renovations are a normal part of homeownership.

Do Regular Maintenance and Repair

By doing regular maintenance and taking care of small repairs right away, you’ll avoid more costly repairs down the road.

One of the best things you can do is get to know your new home. Here are some things you need to know:

  • Your home is made up of various components that work together. These include mechanical systems (heating, air conditioning and ventilation) and the building envelope (foundations, floors, walls, windows, doors and roof ).
  • You need to learn enough about the major mechanical systems of your home to be able to perform routine maintenance and handle various emergencies. Every adult member of your household should know the location of and how to operate the following:
    • Main shutoff valves for water and fuel (oil or natural gas);
    • Emergency switch for the furnace or burner;
    • Hot water heater thermostat and breaker;
    • Main electrical switch;
    • Fuse box or circuit breaker box.
  • Renovations targeted at increasing energy-efficiency may affect appliances venting by a chimney. Check chimney performance if you tighten the envelope or add exhaust fans.

Remember that homes, like people, get old. It’s a good idea to inspect your home regularly and replace or repair parts and materials that wear out with use and time. And remember that since different components of your home work together and affect each other, minor repairs can quickly become major ones if they are not immediately taken care of.

We have included a Maintenance Calendar at the end of this Step that will help you know just what to inspect and when to inspect it.

You will probably be able to do many of the repairs yourself. However, if you feel you cannot handle the job on your own, it is best to call an expert. No matter who carries out the repair, remember that the work has to be well done. Bad materials and poor workmanship will end up costing you more in the end. Don’t forget to keep records of any repairs and improvements you make.

Home Improvements

Besides doing regular maintenance and repairing your home, you will also want to consider renovating or making improvements. These changes will not only make the home more pleasant for you to live in, they may also increase its value.

Change is good but be careful not to go overboard unless you plan to stay in your home for many years. If you are planning to sell your house, you also have to ensure that the changes don’t make your home worth a lot more than the other homes around you. Remember that the value of your home is closely related to the other homes in your area.

Here are some things to keep in mind when planning a change or renovation:

  • Think about how changes would appeal to someone buying your home in the future. You can make very personalized changes with paint because it is inexpensive and can easily be changed. However, things like flooring, cabinets and countertops have a longer life — make choices that will also be appealing to others.
  • Think about getting your home energy-rated. This will tell you how energy efficient your home is and what improvements are possible. Visit the Natural Resources Canada Office of Energy Efficiency at www.oee.nrcan.gc.ca/residential to learn more about the ecoENERGY Retrofit program.
  • Updating the bathrooms and kitchens in an older home can increase its resale value.
  • Don’t underestimate the importance of landscaping. The right planting can improve the appearance and value of your home.
  • Updating your exterior paint, installing new roofing, resurfacing your walkways and driveway, adding attractive mailboxes and front-yard planting will also help make your home more appealing.
  • Over time, some renovations can practically pay for themselves, especially if they result in savings on utility bills, a higher selling price or years of greater comfort and enjoyment in your home!

Make Sure Your Home is Fully Secure

  • Change all the locks when you buy a new home.
  • Add dead-bolt locks and window locks where necessary.
  • Consider getting a security system. Your property insurance rate may be lower if you have one.
  • Get fire extinguishers for each floor in the house.
  • When you are away from home, use lights and radios on automatic timers and arrange to have your mail and newspapers picked up or discontinued. This way, people won’t be able to tell that you are not home.
  • Get to know your neighbours and keep an eye out for each other.

Be Prepared and Stay Safe

Have a fire evacuation plan and make sure everyone in your home knows how to get out of the home from each room in case of a fire. If you have a second floor, you need a special escape plan to get to the ground. Check to see that windows have not been painted shut. Although doors and windows should always be securely locked, you have to be able to open them in an emergency.

A few tips:

Fire extinguishers must be easily accessible at all times. If you have a two storey home, there should be one on each floor. Remember to check your fire extinguishers at least once a year, and to replace them if they are 10 years old or older. To help you remember, make a habit of doing it when you set your clocks to Daylight Saving Time.

In some areas, it is a legal requirement to have smoke alarms in your home. Even if it is not a legal requirement, you will still want them in your home. Check the batteries at least once a year. Carbon monoxide detectors are also important to have. They will let you know if there are high levels of carbon monoxide in your home and can save you from illness or death. To make sure that they are working properly, check them at least once a year. It is a good idea to make a habit of checking your fire extinguishers, smoke and carbon monoxide detectors at the same time.

Paper, paint, chemicals and other clutter can be a fire hazard. Make sure they are stored in a safe place. If you no longer need them, hazardous materials must be disposed of at a community toxic waste center. Never put them in the garbage.

Collect your important papers and store them in a safe place — for example, a fireproof box or a safety deposit box.

Keep a list of emergency phone numbers (including 911, poison prevention line, doctors, relatives, neighbours and friends) close to the phone and make sure your children are aware of it.

Maintenance Calendar

January/February

  • Clean or replace furnace filter
  • Check/clean heat recovery ventilator (HRV); wash or replace filter
  • Ensure that air intakes, exhausts and meters are clear of snow
  • Clean humidifier
  • Clean range hood filter
  • Check and fill basement floor drain

March/April

  • Clean or replace furnace filter
  • Check/clean HRV; wash or replace filter
  • Clean humidifier and turn it off
  • Check sump pump
  • Check gutters and downspouts and clean if needed
  • Inspect air conditioning; service as needed (usually every two or three years)
  • Inspect basement or crawl space for signs of seepage/leakage
  • Open vents to outdoor crawlspaces
  • Ensure that ground slopes away from foundation wall

May/June

  • Open outside hose connection
  • Clean windows, screens and hardware; install screens
  • Check that air intake and exhausts are clear of debris, nests, etc.
  • Clean range hood filter
  • You can turn off your HRV if your windows are mostly open in the summer; if you have air conditioning and keep your windows mostly closed you can keep it running
  • Undertake spring landscape maintenance; fertilize young trees

July/August

  • Use dehumidifier in damp basements
  • For central air conditioning; clean filter in air handling unit
  • Check exterior finishes
  • Check exterior wood for deterioration
  • Check caulking and weather-stripping around windows, including around entry door from garage and home
  • Check basement floor drainage trap; replenish with water if needed
  • Have furnace/heating system serviced (every two years for an electric furnace)

September/October

  • Check fireplace and chimney; service or clean if needed
  • Clean range hood filter
  • Clean leaves out of eavesthroughs
  • Check roofing and flashing for signs of wear or damage
  • Close outside hose connection
  • Close windows, skylights
  • Clean and reactivate HRV, if it was turned off
  • Winterize landscaping

November/December

  • Clean or replace furnace filter
  • Check/clean heat recovery ventilator; wash or replace filter
  • Clean humidifier and turn it on (if needed)
  • Check exhaust fans
  • Ensure gas valve is clear of ice and snow
  • Test space heating system
  • Close vents to crawl spaces
  • Check and clean furnace

Annually

  • Dust or vacuum electric baseboards
  • Vacuum ducts behind warm air and return air grilles
  • Test plumbing shut-off valves to ensure they are working
  • Test pressure relief valve on hot water tank; drain water from tank
  • Do safety checks: smoke alarm, fire escape routes, fire extinguisher, door and window locks
  • Check and, if needed, oil door hinges
  • Lubricate garage door motor, chain, etc.
  • Check attic for signs of moisture in summer or fall
  • Check septic system; clean if needed (usually about every three years)

Every 2-5 Years

  • Check and repair driveway cracks
  • Check and repair the chimney cap and the caulking between the cap and chimney, recaulk as necessary
  • Refinish wood surfaces, including window frames and doors

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