Your first home, from budget to keys
Buying a first home comes with a lot of new words. Here is the order things usually happen in, what each step means, and the costs to plan for besides the down payment.
Six steps to the keys
Most first purchases take a few months from the first call to closing day. Here is what happens along the way.
- Step 1
Set a budget
Start with what you can comfortably pay each month, not the most a lender might allow. We work through it with you on the first call.
- Step 2
Line up the down payment
Savings, a gift from family, or money from an RRSP or FHSA. Lenders will want to see where it came from.
- Step 3
Get a rate hold
A lender holds a rate for you while you shop, often for 90 to 120 days. More on that below.
- Step 4
Shop with a price in mind
Your realtor shows you homes. You already know the price range that works for you.
- Step 5
Make an offer with a financing condition
The condition gives you a few days to have the mortgage confirmed before the deal is firm. We send the lender your file the same day.
- Step 6
Close with your lawyer
Your lawyer registers the title and the mortgage, pays the seller and hands you the keys.
Down payment basics
The federal minimum depends on the price of the home. Under the current rules it is:
- 5%of the first $500,000 of the price
- 10%of the part between $500,000 and $1.5 million
- 20%of the whole price for a home of $1.5 million or more
Put down less than 20% and the mortgage needs default insurance. The premium is usually added to the mortgage rather than paid up front.
The rules change from time to time, so we confirm the current ones on your first call. Tax rules on RRSP and FHSA withdrawals are a question for your accountant.
| Home price | Minimum down | How it adds up |
|---|---|---|
| $400,000 | $20,000 | 5% of $400,000 |
| $650,000 | $40,000 | 5% of $500,000, plus 10% of the other $150,000 |
| $1,600,000 | $320,000 | 20% of the full price |
What a rate hold is
A rate hold is a lender keeping a mortgage rate for you for a set time, often 90 to 120 days, while you look for a home. If rates rise in that time, you keep the held rate.
A rate hold is not a mortgage approval. The lender still checks the home, your income and your documents once you have an accepted offer.
Worth knowing
Most lenders don't charge for a hold.- Each hold is with one lender, so we may set up more than one.
- If rates fall during the hold, many lenders will give you the lower rate when you buy.
- A hold that runs out can usually be started again at the rates of the day.
Closing costs checklist
Plan for roughly 1.5% to 4% of the price on top of the down payment. This is what usually goes into it in Alberta.
-
Legal
Legal fees
Your real estate lawyer's fee plus their disbursements for the purchase and the mortgage.
Often $1,200 to $2,000
-
Inspection
Home inspection
Booked during your conditions period, so you know what you are buying before the deal is firm.
Usually $450 to $700
-
Title
Title insurance
Arranged through your lawyer. Many lenders ask for it, and it covers problems with the title that nobody spotted.
Often $200 to $400
-
Land titles
Land title and mortgage registration fees
Alberta has no land transfer tax. The Land Titles Office charges one fee to register the transfer and another for the mortgage, based on the price and the loan.
A few hundred dollars on most homes
-
If asked
An appraisal, if the lender asks for one
Some lenders want an appraiser to confirm the value of the home. Some cover the cost themselves.
Usually $350 to $500
-
Adjustments
Property tax and utility adjustments
If the seller has already paid this year's property tax, you pay back your share from the closing date. Your lawyer works out the figure.
Depends on the closing date
Not sure where to start?
The first call costs nothing and you don't need any documents for it. Evenings work too.