How to Buy a House in Calgary in 2024
What You Should Know
- Start saving up for a down payment and building up your credit as soon as possible.
- When buying a house in Calgary, make sure to get a mortgage pre-approval before starting to look for a home.
- There isn’t any land transfer tax in Calgary, but budget around 2% of the home’s purchase price for closing costs.
Thinking about buying a house in Calgary? Just like buying a house elsewhere in Alberta, there are a few things that you should know to ensure that your home purchase is a smooth and successful one. This 10-step guide to buying a house in Calgary will walk you through the entire process, from researching your options to closing the deal.
First off, can you afford to buy a home in Calgary? While Calgary home prices are not as expensive as other major Canadian cities, such as Toronto or Vancouver, it’s still certainly not cheap. Let’s see what income and down payment you would need in order to afford to buy a home in Calgary.
10 Steps to Buying a Home in Calgary
Step 1: Saving for a Down Payment
With the average home price in Calgary being $ in , you should start saving up for a down payment as soon as possible. When buying a home in Calgary, just like elsewhere in Canada, you’ll need to make a minimum down payment of 5% of the home’s purchase price if it’s under $500,000. For homes over $500,000 but under $1 million, the minimum down payment is 5% for the portion under $500,000 and 10% for the portion above $500,000. Homes over $1 million require a minimum 20% down payment. It’s important to note that making a down payment of less than 20% will require you to pay for CMHC insurance or a similar mortgage default insurance premium. This additional cost ranges from 2.8% to 4.0% of your mortgage amount.
How does this translate over to current Calgary home prices? Based on an average home price of $, the minimum down payment for a home at the price is $NaN. A detached home would have a minimum down payment of $NaN, while a condo apartment would have a minimum down payment of $NaN. This means that you’ll need to have at least this amount of money in order to buy a home in Calgary and to qualify for a mortgage.
How do you save for a down payment? If you’re a first-time home buyer, the First Home Savings Account (FHSA) can be a powerful tool that combines the best features of an RRSP with a TFSA. If you have maxed out your FHSA contributions, consider putting money towards your TFSA or RRSP. The Home Buyers’ Plan lets you withdraw from your RRSP to buy your first home, but it requires repayment back into your RRSP.
Down Payment Assistance in Calgary
If you don't think you're able to save up enough money to buy a home, there are some down payment assistance programs available in Calgary. The federal government's First-Time Home Buyers Incentive (FTHBI) lets you borrow 5% or 10% of the home's purchase price to be used as down payment. The Attainable Homes Program, which is run by a private non-profit organization, helps buyers to purchase select homes with buyers needing to contribute just $2,000 towards the down payment. The program loans out the rest of the down payment for the mortgage, interest-free.
If you cannot qualify for a downpayment assistance program, you could consider a rent-to-own program, which will allow you to rent a home for a few years and buy the same home at the end of the lease term.
Step 2: Build Up Your Credit Score and Income
Your credit score is one part that determines whether you can qualify for a mortgage from a bank or whether you would need to go to a private mortgage lender. Aim to have a credit score of at least 600. The higher your credit score, the better, as it will allow you to qualify for lower mortgage rates and will give you more lender options. While private mortgage lenders often don’t have a minimum credit score requirement for a mortgage, their private mortgage interest rates will be much higher. That can cost you thousands of dollars extra through higher mortgage interest charges.
In addition to a good credit score, you’ll also want to make sure that your income is enough to not just cover your monthly payments, but that your monthly payments are affordable. The mortgage stress test compares your income and debt load to the cost of your mortgage payments, ensuring that you’ll be able to afford them even if interest rates go up.
Besides having a good credit score and income, history is important too. Lenders generally want to see two years of steady employment and income in order to approve a mortgage.
Step 3: Check Your Mortgage Affordability
Building up your savings and improving your credit are things that take time. As you work on these things, you should also check to see how much mortgage you can afford to borrow. This relies on two debt service ratios, called the gross debt service (GDS) and total debt service (TDS) ratios. These ratios compare how much of your gross income that you are spending on monthly payments, whether it be your housing payments in the case of GDS or housing and all other debt payments in the case of TDS.
Calgary mortgage lenders, and the CMHC, have limits on how high your debt service ratios can be. They are then tested through the mortgage stress test to see how they would perform if interest rates rise. Knowing how much you can safely borrow allows you to determine your maximum affordable home purchase price, based on your expected down payment. This can guide you when you start looking for homes to buy in Calgary.
Step 4: Locate a Neighbourhood
From the bustling urban Beltline to more suburban areas like Panorama Hills, there are 197 neighbourhoods in Calgary for home buyers to choose from, across 14 wards. When choosing a neighbourhood, consider factors like proximity to amenities, schools, public transit and parks, as well as the crime rate in the neighbourhood.
At the bottom of this page, we’ve displayed neighbourhood stats on population, median household income, unemployment rate, most common home type, percentage of residents that are post-secondary educated, public transit users, and immigrants, as well as the median monthly shelter cost for owners and renters.
Comparing Calgary Neighbourhoods (2016 Census)
Map of the City of Calgary
Step 5: Estimate Closing Costs
Once you’ve selected a neighbourhood that you would potentially like to buy a home in, or narrowed it down to a few neighbourhoods, it’s time to estimate your closing costs. These are costs associated with the purchase of a home and usually include things like real estate lawyer fees, title insurance, and registration fees. There isn’t any land transfer tax for homes in Calgary, but there are mortgage and property registration fees.
You can check out your Calgary land transfer tax and estimate your closing costs using online calculators, or ask your real estate agent for an estimate of these costs.
How Much Are Closing Costs in Calgary?
It’s a good idea to set aside at least 2% of your home’s purchase price to cover closing costs in Calgary. This also depends on whether you need to pay for mortgage default insurance if you make a down payment of less than 20% on your mortgage, which would increase the cost.
Step 6: Get a Mortgage Pre-Approval
Before you start house hunting in Calgary, it’s important to get pre-approved for a mortgage. A mortgage pre-approval gives you an estimate of how much the bank or mortgage lender is willing to let you borrow, at a certain interest rate and term. This will help you determine your budget so that you don't waste time looking at homes that are over your budget. Getting pre-approved and providing a pre-approval letter also helps home sellers know that you are a serious buyer.
Often, you can lock in your mortgage rate by getting a mortgage pre-approval, with rate holds up to 120 days or longer depending on your lender. This gives you time to look for a house while your mortgage rate offer won’t change.
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Step 7: Find a Real Estate Agent
While you can buy a home in Calgary without a real estate agent, it’s generally not recommended. A real estate agent can help you navigate the home buying process, give you insights into market trends, handle paperwork, and more.
Make sure to do your research and find a reputable real estate agent with experience in the Calgary area. When interviewing potential agents, ask about their experience and qualifications, their familiarity with the Calgary housing market, and their track record with previous clients.
Step 8: Finding Your New Home
It’s time to start house hunting! Your real estate agent can help you find homes that meet your needs, preferences, and budget. Consider elements such as size, location, and amenities.
It’s important to consider factors beyond just the home itself. Things like home designs and age can vary dramatically not just from neighbourhood to neighbourhood, but from house to house as well. Would the home be close to your workplace, or does it involve a lengthy commute? If you use public transport, are there good connections? Will you need to make major renovations or repairs, and can you afford them? Are there good schools nearby if you have – or plan to have – children?
Narrow it down to a few potential homes, and have home inspections done on your top picks. Doing this will help you get an accurate home value based on the condition of the home, as well as an understanding of what repairs may need to be done before moving in.
Step 9: Making Offers
Submitting an offer can be more complicated than just putting a price down. You may need to provide a deposit, proof of financing, and other documentation. You might want to consider making conditional offers as well, such as offers to buy the home conditional on you getting financing or on an acceptable home inspection.
Once your offer has been accepted, you’ll need to get approved for a mortgage if you’re financing your home purchase.
Step 10: Closing Date
Now that your offer has been accepted and you have been approved for a mortgage, it’s time to close the deal and become a homeowner! You’ll need to sign documents, pay closing costs, and arrange for payment of your down payment. This is usually handled through your real estate lawyer. Once this is done, you are officially a homeowner in Calgary!
Calgary Neighbourhood Profiles and Statistics
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