Being one of Canada’s thousands of first time home buyers can be overwhelming. But it is a feeling like no other. The more informed you are about the process the better.

It is not arguable that owning a home is important and has a lot of advantages. Apart from giving you the pride of owning a house, without doubt, real estate will increase in value over time.

With a growth rate way above inflation. In as much as you will have an obligation to pay off the mortgage, it is oftentimes better than renting.

Mortgage payments increase your equity and you are also paying toward an asset. Isn’t that lovely?


On the 24th of February 2020, the burden of home buying once again took the spotlight. Canada’s voice of mortgage professionals addressed federal mortgage eligibility policies. They raised concerns about the tightness of the policies. And how they’re preventing many Canadians from achieving their goal of homeownership at a press conference on Parliament Hill.

Elaine Taylor, Chair of MPC’s Board of Directors says we should now expect regional pockets where the First Time Home Buyers Incentive will be more supportive, in which housing prices are already more attainable.

This must bring about necessary relief and fuel you yet again to that dream of owning a home. In this guide, we intend to guide you through your purchase.

Time Needed : 60 days 00 hours 00 minutes

This first time home buyers, step by step guide will shed light on the process of home buying.

  1. Build a first time home buyers Budget

    An effective budget will map out your plan to set aside money for your down payment and additional costs. It will also help determine the price of a home you can afford. Qualifying income includes money you earn from investments and other income, not just your job(s).

    – Income Level of $55,000 can afford homes from $200,000 to $250,000
    – $55,000 can afford homes from $200,000 to $250,000
    – $65,000 can afford homes from $250,000 to $300,000
    – $75,000 can afford homes from $300,000 to $350,000
    – $85,000 can afford homes from $350,000 to $400,000
    – $95,000 can afford homes from $400,000 to $450,000
    – $105,000 can afford homes from $450,000 to $500,000


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  2. Investigate Mortgage Options for first time home buyers

    There are many different types of mortgages. Say you don’t have the 20% down payment for a conventional mortgage, you can get a high ratio mortgage. It can be attached to a mortgage default insurance. The default insurance allows for a much smaller down payment.

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    You should be pre-approved for a mortgage before you start house hunting. You can choose to go with the following:

    Broker Mortgage rate

    Mortgage brokers either have a huge number of moneylenders and they can find you good deals, or they are attached to certain banks and they might have the option to get you an exclusive arrangement. Ultimately, you are probably more likely to get better rates with a mortgage broker than without.

    HELOC rates

    A home equity line of credit, or HELOC, is a second mortgage that uses your home as collateral to let you borrow up to a certain amount over time, rather than an up-front lump sum. A HELOC is a variable-rate home equity loan that works something like a credit card. It's different from a home equity loan.

    Cash Back Mortgage

    A cashback mortgage is one in which first time home buyers receive money back upon the closing date when the lender transfers the rest of their mortgage funds. … You can get anywhere between 1-7 per cent, depending on your lender, but most mortgage products generally offer around five per cent of the amount of your mortgage.

    Open Mortgage

    Open mortgages are flexible in that you can make lump sum prepayments or accelerated payments without penalty in order to pay the loan before the end of the amortization period. Although open mortgages have greater flexibility, they tend to have slightly higher interest rates than that of a closed mortgage.

    Mortgage banks

    These financial institutions extend collateralized credit to consumers and commercial customers. The mortgage products stretched out by a bank are then services and gathered by the organization itself. Much of the bank's day-to-day functions include monitoring current accounts and soliciting new customers.

    Comparing mortgage options is one of the critical steps that you mustn’t omit, not all mortgage rates are created equal. Mortgages vary with the terms and conditions, in addition to the interest rate. Each mortgage caters to an individual's particular needs. If you want to find the best mortgage for you, you need to compare all of your options.

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  3. Choose a Realtor with experience in dealing with first time home buyers

    Your realtor will play a vital role in your home buying experience. The best realtor will be a combination of a personal advisor, consultant and negotiator. He/she will show you homes that match your criteria, guide you through the home buying process, negotiate the best possible price for your home and deliver your closing documentation. It will be wise to also hire a real estate lawyer who will look at your offer to purchase before you submit it.

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  4. Go house shopping: Its always fun, especially for first time home buyers

    This is one of the interesting processes and it also sounds easy, but it can take much of your time if you don’t put up a plan when “house-hunting”. To manage your time well in this process, you will need to create a “wish list” that will list the things you want in your home to cater for your immediate needs, future plans and lifestyle. As you go about visiting and viewing available homes, you will have to carry the list to help you remember the features you did or didn’t like.

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  5. Make the offer

    Now that you have seen the home you want and know the mortgage to facilitate your funds you can go ahead and make an offer to the seller. Your agent presents the offer to the seller. This document includes the price, conditions, deposit and closing date. The seller either accepts, rejects or counters the offer (also called “signing back” the offer).

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  6. Home Inspection or New Home Warranty


    Hiring an inspector is voluntary, but it’s a smart idea for resale homes. You can choose to make your offer to purchase the home conditional on the outcome of your inspection. If your inspection reveals major problems, you can negotiate those repairs with the seller before your deal closes, or legally withdraw your offer.

    New Home Warranty

    First time home buyers can secure New Home Warranty when buying a newly built house. The builder provides a New Home Warranty to cover things like deposits and completion dates. This is accompanied by labour and materials for at least one year after building the house.
    It also protects you against structural problems for a minimum of five years. make money freelancing as a new comer in Canada

  7. Finalize the deal


    Finalizing the deal will include the final approval of your mortgage, a meeting with your lawyer to finalize details like insurance and conditions, and the results of a title search.
    Congratulations, on your next property purchase you are no longer named alongside first time home buyers. However, most of the steps above will still apply.

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Tools
  • Use our Mortgage Calculator for first time home buyers

Materials

  • Research Conducted by Parddon Khumalo.

First time home buyers incentive

Did you know the federal government of Canada offers eligible first time home buyers an opportunity to pay a portion of the Mortgage? This program is primarily for people who are buying a house for the very first time.

The program makes it simple for you to buy a house and lower the monthly mortgage loan repayments. It is safe to think of it as a shared equity mortgage. Meaning the federal government shares in the profit and loss of the property value. Therefore, allowing you to borrow 5% or 10% of the property purchase price of the house. However, you repay the same percentage of the value of your house when you sell it or within 25 years after borrowing

By Parddon Khumalo

Parddon Khumalo is personal finance expert. His primary focus is banking but also tends to venture into wealth creation, fintech and data analytics.

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