5 signs you are ready to buy your first home as an immigrant in Canada
Am I ready to buy my first house?
I remember weeks before we were due to finally move to Canada, we embarked on endless online research in an attempt to arm ourselves with as much information as possible (my wife was the specialist in this regard, I only tagged along when needed).
During the course of this constant search of new keywords and following people on social media who had already made the move, one would randomly see a few immigrants excitedly share pictures of the houses they just bought and something that struck was that a fair number of them were able to do this within the first two to three years after their arrival.
Fast forward to a few weeks after we landed and were in search of an apartment to rent back in Ottawa, the realtor, an immigrant from Europe herself, quite pleasant and welcoming shared her story with us and casually mentioned that she had no doubt that in two years, we would be buying our house. I say casually because for me, she was having a laugh, but a target had been set for my wife.
Two years down the line, with a relocation to Calgary in place, I found myself in the passenger’s seat every weekend as my wife drove us around the city viewing houses to buy.
For some, it could take as little as two years, while for others it could take five years or even more. Factors differ (time of entry into the market considering the recent pandemic and the subsequent inflation that has affected interest rates being one), income, and provinces also play a role.
Buying a home is a big decision, probably one of the most important ones you will ever make, so my advice is that you don’t rush it, and don’t ever get caught up in a race to prove a point to anyone. If renting accommodation is what gives you peace, please continue to rent, but if you feel undecided about it, here are a few factors to help you decide if you are ready to buy your home:
1. Do you have a steady source of income?: As basic as this may sound, it needs reiterating especially with unplanned layoffs and inflation rising. It’s important that you are settled in your place of work or business and have been able to build some level of security or at the very least boosted your profile in a way that in the case of you losing your job, the odds are in your favor to find a new one within a reasonable period.
2. How is your credit score?: Some immigrants, based on how well they were doing in their country, come into Canada with enough savings to make a down payment for a house the minute they land, but because we live in a credit society, having the funds does not always equal having access. A good credit score is an integral part of buying your own home, it helps one secure a competitive interest rate on their mortgage, especially with the interest rate for a 30-year fixed-rate mortgage hitting as high as 6.85%.
A good credit score tells the lending company that you are debt-free and a less risky investment.
3. Can you afford a reasonable down payment? While a 5% down payment is the lender’s requirement, aiming for at least 10% -15% helps reduce the Private Mortgage Insurance (PMI) monthly fee attached to the mortgage. PMI costs between 0.4% and 2.25% of the mortgage annually but a down payment of 20% help to totally avoid paying any form of insurance on the mortgage.
4. Having a decent savings and emergency fund: Here is a quick breakdown, imagine you want to buy a house worth 500K, and the 5% down payment is 25,000 CAD, then add closing costs and you are paying roughly 30,000 CAD in total.
Also, consider the multiple other costs that come with the house. Maintaining it. Property Taxes and other fees like HOA (Home Owner’s Association) fees in areas where required, and utility bills.
It is usually advisable that you have 3-6 months of additional savings set aside to cover any expenses/emergency that may occur within this period.
5. Is this the province for you long term? As immigrants, our early years may involve some moving around depending on job opportunities, the size of the city, the cost of living, closeness to friends and family, or even weather conditions.
According to Statistics Canada, nearly three-quarters (73 percent) of the immigrants who came in the 1990s lived in just three metropolitan areas: Toronto, Vancouver, and Montréal. The trend still holds true after the 2016 census, with over half of all immigrants (61.4 percent) and recent immigrants (56 percent) residing in these three cities.
So you need to have made that decision that the city you stay in presently is where you would be living for the long term and is worth putting down your family roots.
Finally, if your present reality ticks all these factors, then the first step is getting a realtor. Getting the right realtor goes a long way in smoothening the process, which, depending on the market at the time could take an average of 8 weeks in settling for the house you want and another 40-50 days to close.
Also, the perfect house does not really exist, especially when you are on a budget. So be open to adjusting your taste.
As much as a house can be a blessing and a good investment, it could also be a curse that takes you one step closer to losing so much, so think wisely before making that decision.
Note: This is not a financial advice. If you have any questions about your mortgage or are ready to buy a home, contact a licensed realtor within your locality.