I’m thinking about buying a house in Toronto. Where do I start?

The first step in buying a house in Toronto is to secure a mortgage pre-approval. A pre-approval tells you how much you can spend and locks you in for 90 days or longer at the current interest rate, allowing you to shop with confidence. This is especially crucial in the event of a possible interest rate rise, which might affect your mortgage rate and, as a result, your home-buying budget. Not sure where to go, contact our team and we’ll put you in touch with someone great!

What is the first step in the process of buying a house?

To begin, you must determine how much you may borrow. Knowing how much house you can afford helps you focus your online home search on acceptable properties, so you don’t waste time looking at houses that are out of your price range. 

Second, your lender’s loan estimate will inform you how much money you’ll need for a down payment and closing expenses. You may need more time to save money, dispose other assets, or ask relatives for mortgage gift monies. In any event, you’ll have a good idea of how much money you’ll need.

Finally, being pre-approved for a mortgage shows your real estate agent and the individual selling their house that you are a serious buyer.

Most real estate brokers will need a pre-approval letter before showing houses; this is especially true at the upper end of the market, where luxury property sellers will only allow pre-screened (and confirmed) purchasers to view their properties. This is to keep out and safeguard the privacy of the vendor. Furthermore, by restricting who enters their home, sellers increase their protection against possible burglars (like identifying security systems, locating expensive artwork or other high-value personal property).

I’m buying a house for the first time, what should I know?

When you’re buying a house for the first time it can be scary, there are so many unknowns. It’s important to inform yourself of the entire buying process so you feel prepared, this starts with getting an experienced realtor and doing some research. As a first-time buyer you’ll want to ensure you take advantage of the first-time home buyer tax credit and rebates. You’ll want to ensure you understand how the stress-test and mortgage insurance work.

For steps to buying a house for the first time you’ll want to read this article, The Toronto Guide To Buying Your First Home

What is the stress-test?

In 2018, a mortgage stress test was introduced for all Canadian home buyers – even if you make a down payment of 20% or more on a house. When you apply for a mortgage, the bank will offer you an interest rate based on your credit score. The interest rate you receive is not the rate the bank will use to determine your mortgage eligibility. Instead, you will have to qualify on a considerably higher interest rate, to ensure you’ll be able to make your payments if they increase. This rate that you will have to qualify for is 5.25% or two percent more than the current rate, whichever is higher.

How long does it take to buy a home?

Buying a property in Toronto takes roughly 3-6 months from start to finish (from browsing online to closing the sale). The typical time to close on a property is 60 to 90 days after a home is chosen and an offer is accepted. However, cash-paying house purchasers who are well-prepared have been known to purchase properties far faster.

The speed with which residences are sold is influenced by market circumstances. Buying a house in a hot market with a lot of activity may take a bit longer than usual – typical of the Toronto market. This is because as business picks up, multiple parties engaged in the transaction fall behind. For example, a rise in house sales raises demand for property assessments and home inspections, but the number of appraisers and inspectors available to complete the task does not increase. Turnaround times for loan underwriting by lenders can also be slow. When each side in a transaction takes a day or two longer to complete their task, the overall process takes longer.

Should I be buying a house vs a condo?

We often get asked, “should i buy a condo before a house?” It’s important to first consider whether your budget can afford a house in your desired neighbourhood. This will quickly dictate your options. Perhaps you are looking at a semi-detached home in Toronto vs a condo. In this case, it’s important to think about your lifestyle and how you use the property. Do you need outdoor space and a yard? Do you love being in the heart of the action? There are a ton of things to consider all of personal preference but go with your gut – or just go and look at multiple property types on your first day out to see what each neighbourhood and property type will work, or not for you.

Related: Living in Downtown Toronto VS the GTA

What is a buyer’s market?

A buyer’s market is defined as a real estate market in which the quantity of houses for sale exceeds the number of purchasers wanting to buy one. Because there are more properties on the market than buyers, buyers have more freedom to pick what they want and are ready to negotiate when working with sellers.

During buyer’s markets, house prices tend to fall due to a large number of available houses. Sellers are compelled to compete for buyer attention, which may benefit you as a buyer greatly. If sellers are attempting to entice you to buy their home, they may be more ready to make concessions on the asking price and closing expenses than they would normally. 

Read this article on Forbes – Seller market Vs Buyers Market.

What are the additional costs associated with buying the house?

Because not all buying situations are the same, the fees associated with your transaction may very. It’s best to speak to your realtor in advance to know exactly what to expect.

When it comes to a resale property, you only have two closing costs to account for: your Land Transfer Tax and legal expenses. You can expect to pay these when you get your keys and the title is transferred to you from the seller. On closing your lawyer will provide you with a Statement of Adjustments that will outline all of your closing costs and expenditures.

Here are a few additional costs to consider:

  • Home inspection fee 

In some cases you may decide to purchase a home with a condition requiring a home inspection. In this instance you would hire and pay the inspector yourself, usually a few hundred dollars – but well worth it should you have this option. In many cases the Toronto real estate market is too ‘hot’ to add this condition to your offer when purchasing. In a ‘sellers market’ like the Toronto real estate market it is typical that buyers waive conditions to make their offers more enticing.

A pest inspection cost to ensure the house is clear of termites and other dangerous creatures is another home inspection fee you may encounter.

Lead paint has also become a major hazard in any property built prior to 1978. On older properties, some lenders mandate lead paint inspections and even repairs.

  • Mortgage insurance 

PMI (private mortgage insurance) is a term used to describe private mortgage insurance. If you can’t afford to make the entire 20% down payment, most lenders will ask you to get a supplementary insurance coverage. You can ask your lender to withdraw this insurance once you’ve reached 20% equity. If they ask for the first month’s PMI at closing, don’t be shocked.

  • Pre-Construction Closing Costs

With pre-construction properties things are a bit different. In addition to your legal fees and Land Transfer Tax, you are also paying Development Charges and miscellaneous fees like the Tarion Home Warranty fee. These fees are specific to newly built properties.

If you’re looking at buying a pre-construction Toronto condo give this blog a read for pre-construction closing costs & development charges.

How much do I have to pay an agent to help me buy a house?

If you’re planning to purchase a property in the near future, you might be wondering how much you’ll have to pay your real estate agent to assist you. The answer is that it is dependent on the situation. Fortunately, if you’re seeking to purchase a house, you won’t have to pay your real estate agent anything in the great majority of cases. This is due to the fact that the great majority of real estate brokers get compensated when a house is sold. So, how is a real estate agent compensated?

Typically, the commission is paid by the seller. When a home is sold, the seller is normally responsible for paying a commission to the real estate agent. The typical commission on the sale of a home, for example, is roughly 5%. When the house is sold, each real estate agent will receive a 2.5% commission. The buyer’s agent will receive half of the commission. The seller’s agent will receive the other half of the commission. In addition, the seller may be required to pay for the services of an attorney to assist with the closing. When someone sells a home in the neighbourhood, there are a variety of costs to consider.

In most cases, the buyer is not required to pay anything to the real estate agent. Because the seller is often liable for the real estate agent commission, the buyer should not be required to pay anything to the real estate agent. Simultaneously, you’ll need to keep track of how much you’re spending for your house. Even while your real estate agent should represent your best interests, keep in mind that the real estate agent will be paid a commission depending on the home’s sale price. This is also something to bear in mind if you’re looking for a house loan.

Finally, you want to ensure that you receive a reasonable price for your home.

As a result, you should engage with a real estate agent who is well-versed in the local market. As a result, you may put yourself and your family in the greatest possible position to succeed.

Related: How Much Does It Cost To Sell A House or Condo In Toronto

What kind of credit score do I need to buy a home?

Credit is a vital component of the economy. Without credit, lenders would be unable to set lending rules that decide who should and should not be given credit. Your credit score is determined by your debt payback history; therefore, if someone frequently misses payments, their credit score will suffer.

It’s crucial to remember that in order to develop credit, you’ll need to borrow money. Many people find this challenging since they take pleasure in never using a credit card or taking out a loan. When it comes to purchasing a significant purchase like a house, though, borrowing money rather than accumulating money for decades makes more sense. If you find yourself in this situation, it may be useful to acquire a credit card and immediately pay it off, developing credit along the way.

But first, let’s return to our initial question: what credit score is required? Because the minimum credit score necessary is impacted by other aspects, such as how much money you have saved for a down payment, the loan size, and even where your property is situated, it is advisable to contact with a mortgage banker to obtain a complete response to this issue.

How much do I need for a down payment?

5% to 20% is what you need for a down payment, depending on the price of the property. If you’re waiting until you have 20% to buy give this article a read, “Why 5% Down Today Is Better Than 20% Tomorrow”. You need to see the math on why buying a house right now makes more financial sense than waiting.

Should I be worried about rising interest rates?

It’s important to be able to handle rising interest rates and that’s why the government introduced the Stress Test. It is especially important to prepare for these increased rates that we know are on the horizon. Do the math, speak to a professional and ensure you’re well educated on your finances. If you’re prepared there is no reason to worry.

Should I sell my current home before buying a new house?

Selling before purchasing will almost always make you more appealing to potential buyers. As a result, your offer is “non-contingent” on the completion of other transactions. When you make a non-contingent offer to a seller, you’re just half as dangerous as a buyer who also needs to close on the house they’re selling.

The rationale is straightforward…. The more complicated the transaction, the more likely something will go wrong, and the transaction will not close on time (or at all). A non-contingent offer has fewer “moving parts” and is more likely to conclude without a hitch.

The contingent proposals are usually the first to be rejected in a bidding battle. So, if you want to increase your competitiveness and leverage, you should prior to putting bids on the next house, be prepared to place a firm offer. For some this might mean getting your existing home sold and closed before the purchase. However, this is an unlikely scenario in the Toronto market where competition is high. In this case it’s often better to speak to your realtor about both buying and selling. They will assess the current market value of your home and help guide you appropriately.

Obviously, selling first is easier said than done, since it frequently necessitates a double transfer and temporary accommodation in the interim. So, in the event that closing on your previous sale first isn’t doable…. At the very least, attempt to get your transaction through the inspection and assessment stage. Because they are the two most prevalent “stumbling blocks” that lead negotiations to fall apart. When it comes to contingent offers, waiting to write buy offers until after you’ve completed them makes you significantly more appealing.

Related: How Long Will It Take To Sell My House/Condo in Toronto

How many homes should I view before buying one?

You should view many homes as much as you can before you buy a one. This will help you to locate the best deal at the end of the day. It’s entirely up to you! Shopping at home is now easier than it has ever been. The opportunity to browse for houses online and view photos before leaving the comfort of your own home has dramatically transformed the home-buying process. Convenience has never been higher. But nothing beats seeing a house in person to get a sense of how it looks and feels.

What if my offer is rejected?

Purchasing a home is not always enjoyable; in fact, it can be quite difficult and stressful at times. It might be difficult to locate the right property, but if you get a rejection, contract requirements, money, the listing agreement commission structure, or personal reasons could all be possible causes.

The amount offered may have been excessively low or excessively large. A better offer may have been accepted by the seller. In the eyes of the seller, a better offer might be anything: a letter from a bidder, a speedier closing date, an all-cash offer, and so on. Personal reasons, which might include anything from a change of heart to a variety of other factors.

If you run into an issue when attempting to buy a property, such as the buyer not liking the offer you provided to them, you may always try again.

Should I order a home inspection when buying a house?

Yes! Home inspections are highly recommended because they might discover issues in the home that are not easily spotted. Home inspections provide peace of mind for one of life’s most important investments. However, a home inspection is a condition during an offer and can make your offer less competitive. When you work with a top Toronto real estate agent they will recommend what they think is best.

Do I need to do a final walk-through?

You have the option of doing a final walk-through as a buyer. It is highly recommended that you do one. When buying a property, it is common for several weeks to pass since you last went through it. During that time, a lot of things can happen. When completing a final walk through, you’ll double check everything is in working order and you’ll check to make sure the sellers are packed up and actually planning to move out on the specified date.

Do I need house insurance to buy the house?

Whether you’re a first-time buyer or a seasoned homeowner, purchasing a new home is an exciting process. Going to open houses or visiting homes for sale with a real estate agent allows you to see what amenities you want in your future home and what features you don’t. Finding your ideal new home and beginning the purchasing process is exciting, but it can also be stressful. Worrying about price negotiations, home inspections, and mortgage requirements may take away from the thrill of purchasing a property.

Getting house insurance is sometimes neglected in the extensive list of things to complete before buying and moving into your new home. Obtaining homeowners insurance prior to closing is a critical step in the home-buying process that should be prioritized.

In most cases, homeowners insurance is purchased prior to closing on a house. You can protect your new home from disaster by getting the coverage you need before you even move in. It’s crucial to compare different insurance policy alternatives because they may provide varying levels of coverage. Once you’ve discovered the finest insurance for you, make sure it fits your lender’s needs. Most banks will not finance a mortgage or a home equity line of credit unless the property is insured. Some lenders may even require you to acquire additional coverage in addition to a standard homeowners insurance.

You can obtain insurance after establishing that your selected coverage fits your lender’s standards. This should be completed prior to attending the meeting to formally close on your house. When the final closing date approaches, the insurance provider will usually pre-approve the policy and then wait for your escrow/title firm to issue a request for Proof of Insurance. Before the closing date, the insurance carrier will email or fax a confirmation of coverage.

A homeowners insurance coverage protects your new home from calamities like a busted pipe or a fire. This safety net provides an obvious benefit to the homeowner in the event of an accident. Rather than paying for costly repairs out of cash, the insurance covers the expense of any damage. Homeowners can rest easy knowing that their property will be repaired and that they will be able to continue to enjoy their investment.

Your house insurance provides comparable protection to your lender. Your lender wants to know that their money is secure after they put it into helping you buy your new house.

How to choose the best neighbourhood for buying the house?

To be honest, location is perhaps the most crucial determining element when buying a property, because you can’t alter the location no matter how much you enjoy the actual house. While there are many minor details to consider when purchasing a home, your location has a significant influence on your everyday life.

  • Distance taken to visit places 

Distance counts if you have to commute to work every day. Time and distance aren’t always equal, as all commuters know. So, if you live in a suburb 20 miles outside of town, driving to and from work may take an hour (or more).

A test run during peak hours is the best method to see if the travel time is manageable. Drive to your target neighbourhood during morning rush hour to go to work. This will give you an indication of how long your daily commute is likely to take.

  • Shopping & Local Businesses

When individuals are searching to see what is available in a certain location, restaurants, grocery shops, and entertainment are frequently at the top of the list.

This does not imply that these conveniences must be within walking distance. It might imply that you require them to be within a short driving distance. If that’s the case, you’ll want to know how long it takes to go to these locations and what hours they’re open so you can plan ahead.

  • Recreational Activities

Whatever stage of life you’re in, you’ll want to make sure that the neighbourhood’s leisure activities suit your needs. Perhaps you’re looking for local bike routes so you can get on your bike and go for a ride on a Saturday morning rather than having to pack up the vehicle and go someplace else to cycle. Perhaps you’d want to find a nearby pool where your children can learn to swim.

Ideally, you want a location that corresponds to how you wish to spend your leisure time. If you know you’ll be spending a lot of your free time doing certain things, search for a community that encourages those interests as much as possible.

  • Walking capabilities 

Does the community you’re contemplating have sidewalks? It might not be the first thing that comes to mind. Paths for walking? Busy streets with enough crosswalks?

If you want to live somewhere active, walkability is important. Sidewalks really make areas safer by allowing people to move through. If you have a dog that has to be walked every day or children who will be going to school. It’s essential to live somewhere pedestrian-friendly, whether it’s near a park or a friend’s house.

Your lifestyle is another factor to consider when it comes to walkability. Are there any nearby parks, trails, or public spaces? Having things nearby that are simple to go to on foot, depending on your interests, might be a huge benefit when choosing a neighbourhood.

  • Educational institutions

It’s no secret that schools have an influence on a home’s value. While it may not appear to be a worry for those without children, the quality of the school system may have a direct influence on the resale value of your property.

If you have children who will attend the neighbourhood school, there is more to consider than the specifics of your school district or school. Talk to your neighbours, go to a PTA meeting, or request a tour from the school.

  • Public Transportation

If you rely on public transportation as your major mode of movement, then transit accessibility is critical. It’s worth your time to look into the local transit authority to gather as much information as possible and ensure you have simple access to your destination.

  • Taxes 

People frequently opt to include the amount of property taxes in their monthly mortgage payment. Taxes, on the other hand, might rise over time and must be taken into account. When deciding on a neighbourhood, check at the average property taxes for the region over several years to determine how much volatility there has been.

If you’re relocating to a newer, growing community, you should also think about potential taxes. Property prices will rise over time as more residences are built and public services are made available, and taxes may rise as well.

  • Prospects for the Future

It’s crucial to know what the future of your neighbourhood looks like, whether you’re planning to live in your new home for five or 25 years. The simplest method to accomplish this is to contact the local planning office and inquire about any pending development plans.

Furthermore, even if nothing is currently planned that would directly affect your property, development CAN have an influence on the general feel and aesthetic of a community. If your development contains a large vacant field, be aware that the property may someday be developed with dwellings or stores.

If your future house has no rear neighbours and backs up to a forested area, check to see if the land is protected or if it may be purchased and developed. When it comes to choosing the appropriate area for you, there are several aspects to consider. Choosing the correct location for your new house will improve the quality of your daily life and your pleasure.