Hi everyone and welcome back to The
Independent Dollar. Today we are going take you through a simple step-by-step
guide to buying your first home in Canada. The first step is saving up for your
down payment. In Canada the minimum amount you need in order to buy a home
is 5%, so on a $300,000 home, that would mean a down
payment of at least $15,000. However, if your down payment is less than 20% your
bank will also require that you purchase mortgage default insurance through
either CMHC or Genworth Canada. While insuring your mortgage may not sound
like a bad thing, this type of insurance is not to protect you. The insurance is
to protect your bank if you are ever unable to repay your mortgage. So how
much does this insurance cost? Well if your down payment is 5%, it will cost you
4% of your total mortgage amount. On that same $300,000 home,
4% on a $285,000 mortgage would mean an insurance fee of $11,400! Allmost as
much as your down payment and a very expensive fee especially for new
homeowners. This insurance is applied for and set up through your bank and you can
choose to either pay an upfront out-of-pocket or you can have it added
to your mortgage. I'll include a few links in the description below if you'd
like to learn a little bit more about this insurance. The next step is getting
pre-approved, which means meeting with a Mortgage Broker or your Bank to
determine how much of a mortgage you can afford. This is something Realtors will
want to see before they start showing you homes because it lets you both know
what price range you can afford. This is also the time where you'll start
negotiating the type of mortgage you want with your bank. Make sure you stay
tuned for a next video because we're going to be showing you the pros and
cons of different types of mortgages and we'll also be sharing our strategies on
how to negotiate the best rate and perks with your new mortgage. Make sure you
hit that subscribe and bail button so you don't miss out. Next up is the fun
part, shopping for your new home. Once you find a realtor that you're comfortable
with, you'll let them know how much you're approved for and what areas you
would like to live in, as well as the features that you're looking for in your
new home. They'll take all of this information into account and start
finding you the best homes that match what you're looking for. Your Realtor
then schedules appointments at each of these homes
so you have a chance to walk through them and decide whether or not you like
them. In Canada, the fees paid to real estate
agents are paid for by the sellers. Meaning, when you buy your home the
person who sold you the home will be paying the fees for your real estate
agent. You've been searching for a home and you finally found one that has
everything you've been looking for. The next step is to submit an offer to the
seller in order to buy it. Your Realtor will guide you on what
price you should offer, negotiate all of the little details and prepare all of
the paperwork for you on your behalf. On top of negotiating the price and the day
you want to move in, your Realtor will also be responsible for negotiating some
important conditions before you finalize your offer. These conditions are usually
things like a formal inspection to ensure that the home that you're buying
is in good condition and also confirming that you can get financing for that home.
Even though you've already been pre-approved for a specific mortgage
amount, the bank will still want to ensure that they're comfortable with the
home that you're buying before they'll give you that mortgage. They will usually
send someone to appraise the home to ensure it's worth what you're paying for
it and also ensure that it's in good condition. They will also want to confirm any information you submitted in your
mortgage application, like the amount of time you've been working with your
employer, how much you make every year and also confirm that you have enough
saved up for your down payment. They will also want to see that you have enough
money set aside for closing costs which we will be discussing next. If you're
putting less than 20% down, then CMHC or Genworth Canada will also want to review
your mortgage information before they will approve the default mortgage
insurance on your application. The final step is all of the legal
paperwork. Once you have a firm offer in place, your bank will submit all of the
necessary information to your lawyer for you. Your lawyer will then review all of
the paperwork for your mortgage and prepare the legal documents to purchase
your new home. As we mentioned earlier, you need to ensure you have enough money
set aside for closing costs. This amount is in addition to your down payment. So
how much do you need? Closing fees include the cost of your
lawyer as well as additional expenses that you might have to pay in order to
finalize your home purchase; like land transfer tax, any inspections including
appraisals of the home or inspections of a septic system or a well if those are
on the property. As a general guide, you want to
ensure you have about 1.5% of the purchase price saved up to cover these
costs. On that $300,000 home, that would mean saving $4,500 to cover
these fees. So in total, to be financially prepared for your home purchase you need
at least 5% for a down payment and 1.5% for closing costs. In this example, that
would mean you would need to save up at least $19,500
to purchase a $300,00 home. Aside from these, there
are some additional expenses like utilities set up costs, appliance
purchases, property taxes and other fees that you should be aware of. So head over
to our website TheIndependentDollar.com to see a full list of items that
you should keep in mind when budgeting for your new home. Hopefully you found
this video helpful, we'll see you next week when we start discussing the
different types of mortgages and how to negotiate the best possible rate.
