Buying a house is probably one of the biggest moves of your life. In this video I teach you the 6 steps to buy a house in Toronto Ontario and to beat the crazy sellers market that Toronto is experiencing in 2022.

By the end of this video you will have a better understanding of how much it actually costs to buy a house and how close you are to home ownership. I cover how much you need for a down payment, the importance of working with a knowledgeable, local Real Estate Agent, what you need to get preapproved for a mortgage, what to expect when looking for a home, how to make a winning offer, and how to smoothly close on your next home.

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[Transcript]

So you’re thinking about buying a house in Toronto? That’s probably one of the biggest moves of your life so in this video I’m going to show you the 6 steps to buying a house in Toronto. And I’m going to get in to it right now.

Hey if this is your first time to the channel and you want to know everything there is to know about buying a house in Toronto or the Greater Toronto Area, then subscribe below. Tap the bell for notifications so you can learn my strategies for getting the best price for your next home.  My name is Rochelle Manguino I’m a local real estate agent right here in Toronto Ontario. For the last 7 years I’ve been helping people just like yourself move to the Greater Toronto Area and I absolutely love it. So whether you’re looking to move in 9 days or 90 days just give me a call, shoot me a text, send me an email, or even schedule a Zoom call down in the description below. I’d be happy to help you make a smooth move to Toronto. So let’s get right in to it! This is how you buy a house in Toronto.

Step 1. Save for a Down Payment

The first and most important step in your home buying journey is having enough money to actually buy a home, or at least enough for a down payment. How much money do you need for a down payment? In Ontario, if your purchase price is under $500,000 then you can have as little as just 5% of the purchase price for a down payment. For houses that are between $500,000 and $1,000,000, your minimum down payment is 5% on the first 500k, and then 10% on the remaining amount. And then for homes over $1,000,000, your minimum down payment is 20%.  For more detail on how to calculate the minimum down payment needed for your next home, I have a link down in the description below. But here’s the thing: Although you can purchase a home with these minimum amounts, I do recommend you save for a down payment of at least 20% under any circumstance because doing so will  save you thousands of dollars on interest and insurance. In Canada, if you have less than a 20% downpayment, you must pay mortgage insurance - it’s a requirement. The Canada Mortgage and Housing Corporation, or the CMHC for short, they apply these insurance premiums to your mortgage. The premium amount varies depending on the amount of your mortgage and how much down payment you have, but can range anywhere between .6% to 4%.of your mortgage amount. For example, if you purchase a home for $900,000, and you put just the minimum down payment required, your insurance premium would be $33,400.  So it would be in your best interest to save up as much as you can for your down payment, at least 20% of the purchase price if possible. That way, you can avoid paying the insurance premium altogether. Now if you don’t have at least 20% saved up for your down payment, that’s okay too. If you happen to be a first-time home buyer, the Canadian and Ontario governments have programs in place to help offset the cost of buying a home. These programs include The Home Buyers Plan which allows you to borrow up to $35,000 from your RRSPs for a down payment, The First Time Home Buyer Incentive , where the government will give 5 or 10% of your home's price to put towards your down payment, and then the Provincial and Municipal Land Transfer Tax rebates where you can get up to $4,000 back in Ontario land transfer taxes, plus an additional rebate of up to $4,475 dollars if the house you buy happens to be in the city of Toronto. I’ll have links to more detail on these programs down in the description below. And FYI, although your insurance premium can be paid all at once up front, you do have the option to pay the premium in installments. Talk to your real estate agent about connecting you with a lender who can add your premium to your mortgage payments so that you have one predictable payment for your home every month and you can budget accordingly. That said, that brings me to step 2 in the home buying journey: Find a good real estate agent. 

Step 3. Get Pre-approved for a Mortgage

Step 3: You need to get pre-approved for a mortgage. That way you’ll know how much you can afford and start looking for homes in that price range, and it also adds to your negotiating strength because it shows sellers that you’re serious about purchasing their home and you have the financial means to do so. When you first apply for a mortgage, your lender will take a look at a bunch of factors regarding your financial history, but specifically, your income, and your credit score. To get an insured mortgage, your credit score needs to be at least 600. The higher your credit score, the better your mortgage interest rate and lending options. If you need to improve your credit score to purchase a home, then I have 3 pro tips for improving your credit: Number 1 is to limit credit inquiries on your account, 2 is avoid late payments on your credit cards, and 3 maintain an overall good credit history.  Along with a good credit score, having a stable income will also make getting a mortgage easier. If your income is less steady because you’re self-employed or a contract worker, then plan in advance by putting money aside as an emergency fund. Knowing how much you can afford and how much you’re comfortable spending is key to finding a home that you can feel good about. It’s also important that when you’re looking for a mortgage loan, you shop for a lender that has the best interest rates for your needs. Now that may seem obvious, but the reality is is that most people go to their bank where they have their savings or chequing account with . However, my pro tip is to get a mortgage broker. The difference between working with your bank vs a mortgage broker is that banks can only provide their OWN mortgage rates and products. Their selection is limited, and you are responsible for negotiating your own rates. On the flip side, Mortgage Brokers have access to MULTIPLE lenders and mortgage rates. What they do is they shop around different lenders, they have a portfolio of different banks, credit unions, even B lenders that they work with, and they find the best mortgage rate and terms on the market for your specific needs. For example, Bank A who you do your every day banking with, they may offer mortgages at 1.9%. But go across the street to the next financial institution and they’ve got rates at 1.2%. That could mean a savings of thousands of dollars over the length of your mortgage term. Plus the mortgage broker does all that shopping around for you. And you don’t pay them a cent, because they get paid by the lender. So their services to you are free. On top of all that, mortgage brokers work on commission meaning they’ve got skin in the game. They’re going to do everything they can do to make you happy. For the mortgage broker that I personally recommend, feel free to give me a shout. All my contact info is down below I’ll tell you about a crazy time one of my clients and I were in a fast paced bidding war. My Buyers found their dream home on Day 1, needed a mortgage pre-approval fast, and my mortgage broker came through in the nick of time it was amazing. By the way, if you are getting value out of this video so far then don’t forget to give me a thumbs up. Also hit that red button to subscribe to my channel so you get all of my tips and strategies for purchasing a home in Toronto. 

Step 4. Look for Homes

Now that you know how much you can afford and what you’re comfortable spending, you and your Realtor can start looking for homes together. This is the exciting part. For most people, factors such as commute time to work, proximity to friends and family, neighbourhood amenities, safety and school rankings tend to be top of mind when considering where to move. In terms of commuting, you obviously want to be comfortable in your daily commute. Just keep in mind that if you’re looking outside the city, you may get more space for your budget but it may add-on hours to your daily commute. Similarly, being in a neighbourhood  close to good schools is important for many young families, but often you’ll find high costs of living near some high ranking schools. So as you go through your search, it can be tempting to expand your search outward and raise your budget, but it's important to continue to weigh out the pros and cons and look only for homes that you can afford. Currently in Toronto, homes tend to sell for more than the asking price. So, for example, if your budget is 1 million dollars even, then you would be safe to look for homes listed in the 930 to $980,000 price range. For more information on particular neighbourhoods within the GTA, check out the other videos here on my channel. I have videos detailing some of the most popular areas in Toronto and the GTA that people are moving to. Places like Whitby, Burlington, North York, just to name a few. I do neighbourhood drive throughs so you can see what housing looks like in some of the top neighbourhoods in the city, you’ll learn about the current housing market -  average price points, nearby amenities and school rankings, so that you get a good picture of the kind of home you can get in Toronto and how far your budget can take you.  

Step 5. Make an Offer 

Alright step 5. The next step in the home buying process is now that you’ve found a house you like, you need to make an offer. Your offer will outline everything from the price you’re offering to pay, the things you want included in the sale like appliances or light fixtures,  your preferred closing date, and most importantly you’ve got conditions that need to be met for the deal to go through. Depending on your market, if you’re in a buyer’s market, then it’ll be common to see offers with a lot of conditions, like doing a home inspection, or a lawyer review. Right now in Toronto, we’re in a sellers market. Sellers do have an upper hand over buyers in this market because there’s a high demand for housing, yet very low supply. That said, you don’t see as many conditions in offers because in a competitive sellers market, too many conditions protecting the buyer will likely weaken your offer. However, regardless of the circumstances, I do always encourage people to include a financing condition in their offer. An offer that’s conditional on financing is used to protect you, the Buyer, by telling the Seller that your offer to buy their property is conditional on you obtaining financing. Now your Realtor will draft up your offer for you, they’ll write up all those clauses for you. But that said, you do want to make sure you have a Realtor who is local and someone who’s aware of the common practices in your market. Because legal wording can and will vary from contract to contract. For example, I always make sure that when I draft up say a financing condition for my client, it’s worded in a way so that the financing isn’t just obtained, but that the terms of the mortgage are satisfactory to my Buyer. That way if there are any issues with the lender, then my client isn’t going to get in trouble because of any legalities in the paper work. Now once you’ve submitted your offer, the Seller then has 3 options. They can can either accept your offer, reject it, or they can counter it. If you get a counter offer, then you’re going to go back and forth with negotiations, you may need to compromise on small things, but a good Realtor will work hard to protect your best interests and help get you what you want. At this point you’ll also need to have a deposit ready. A deposit in Toronto is typically required within 24 hours of acceptance of an offer. The deposit amount in Toronto is typically around 1% of the price of the home. If the sale falls through because you and the seller can’t come to an agreement on the terms of your offer, then your deposit is returned. But if you do reach an agreement and all the terms of the offer have been fulfilled, then your sale is final and your deposit is applied toward the final purchase price of the home. 

Step 6. Close on the home

As soon as your offer is accepted, your deposit is submitted, and there are no more conditions to be fulfilled, you have what’s called a firm agreement and the closing process begins. Closing is the point at which the ownership and possession of the property are transferred from the Seller to you. It’s the day you provide payment for your new home, and it’s when you pay other closing costs as well. When you purchase a home, there are closing costs you need to pay, the two largest components of those closing costs being the Land Transfer Tax and Legal Fees. To calculate the cost of the Land Transfer Tax on your next home I have a link for you down in the description below. In terms of the legal fees in Toronto they vary depending on the work, but can typically run you anywhere between 8 and $1,800. Overall, you can expect your closing costs in Toronto to be about 3-5% of the purchase price of your home. But that’s it. Once your mortgage is transferred, your closing costs are paid and the paperwork is signed, you’ve officially purchased your new home! You’re handed the keys and now it’s time to celebrate because congratulations, you just hit a huge milestone in your life. All that’s left is to move in and enjoy life in your new home. So I hope that gave you a better understanding of how to buy a house in Toronto. And if you’re looking to buy a home in Toronto yourself then give me a call, I would love to help you out. Whether you’re moving in 9 days or 90 days just give me a call shoot me a text send me an email or schedule a zoom call all down in the description below. I’d be happy to help you make a smooth to Toronto. In the meantime, check out this video on some of the best areas in Toronto to move to. And I’ll see you around town. Until next time.