How to Buy a House in Vancouver in 2024
What You Should Know
- Start by saving up for a down payment and boosting your credit score.
- Closing costs can range from 3% to 4% of the home's purchase price, so keep that in mind as you save.
- Consider your lifestyle and space requirements - finding the perfect property type that suits your needs is key.
- Buying a house in Vancouver is expensive, but there are down payment assistance programs available if you qualify.
With the highest home prices in the country, buying a house in Vancouver is a major financial decision. For prospective buyers, it's a good idea to familiarize yourself with the steps to buying a home in Vancouver. This 10-step guide on how to buy a house in Vancouver can help make the process easier.
Image: False Creek, Downtown Vancouver
Before you start looking for a home, it's important to understand the current real estate market in Vancouver. This gives you an idea of how much a home would cost and how much you would need to save up for. Based on current home prices in Vancouver as of , the average home is well over $1 million.
Would you be able to afford to buy a house in Vancouver? In the section below, we’ll look at what the minimum income required to buy an average home in Vancouver is, based on making the minimum down payment allowed at that home price for .
10 Steps to Buying a Home in Vancouver
Caption: Stanley Park
Step 1: Saving for a Down Payment
Most people looking to buy a home in Vancouver will need to get a mortgage loan. Mortgages require you to make a down payment, with the minimum down payment that you can make being based on the price of the home. Typically, it will range between 5% to 20%, with most Vancouver homes requiring a down payment of at least 20%. Before you start the home buying process, it’s important to save up enough money for a down payment. This requires developing a budget and saving plan that works for you.
As a general rule, homes that cost over $1 million will require a down payment of at least 20% of the home’s purchase price. For example, if you’re purchasing a home for $1.5 million, you’ll need a down payment of at least $300,000.
You can make a down payment of less than 20% if you get an insured mortgage. Insured mortgages require you to pay for mortgage default insurance from a mortgage insurer, such as CMHC or Sagen Canada, and are only available for homes less than $1 million. With this type of loan, your down payment can be as low as 5%. However, you’ll have to pay an additional one-time fee for the mortgage default insurance premium, ranging between 2.8% to 4.0% of the total amount of your mortgage.
With an insured mortgage, the minimum down payment is just 5% for homes less than $500,000. If a home costs between $500,000 and $1 million, the minimum down payment is 5% of the portion that is below $500,000 and 10% of the portion that is above $500,000.
For an average detached home in Vancouver, the minimum down payment is $NaN in . That’s more than the average price of a home in some Canadian cities, such as Edmonton or Winnipeg!
Based on the average attached home price, the minimum down payment is $NaN, while the average condo would need a minimum down payment of $NaN. You will need to have this amount saved up in order to buy a house in Vancouver.
There are down payment assistance programs available, especially for first-time home buyers. The First Home Savings Account (FHSA) lets you save $8,000 per year tax-free, up to $40,000, while giving you a tax deduction on your contributions just like an RRSP. While $40,000 isn’t nearly enough for a down payment on a Vancouver home, it is still helpful for first-time home buyers in Vancouver.
You can use other programs in addition to the FHSA, such as the Home Buyers' Plan, which allows you to withdraw up to $60,000 from your RRSP to buy a home. The federal government’s First-Time Home Buyers Incentive (FTHBI) can also provide financial assistance.
First-Time Home Buyers Incentive (FTHBI) in Vancouver
The First-Time Home Buyers Incentive (FTHBI) allows you to borrow 5% or 10% of the home's purchase price to use as a down payment on your home. If you're looking to use the First-Time Home Buyer Incentive to buy a house in Vancouver, here are some things that you should know:
- Your annual income must be $150,000 or less.
- The mortgage amount cannot be more than 4.5 times your annual income.
- Provides 5% or 10% towards your down payment.
Since you cannot borrow more than 4.5 times your annual income, which must be $150,000 or less, this means that you are limited to a maximum mortgage of $675,000 in order to qualify. That’s equivalent to a maximum home price of roughly $700,000 if you were to make a minimum down payment, and is well under the average price of a home in Vancouver. It’s even less than the average price of a condo! This can make it difficult to use the First-Time Home Buyers Incentive when buying a home in Vancouver, due to the income limit and borrowing limit.
Step 2: Build Up Your Credit Score and Income
When you apply for a mortgage loan, the lender will take a close look at your financials. This includes your credit report and credit score, income, debts, and assets. Generally, being creditworthy means having a good credit score, high income, low debt, and sizable assets. Lenders want to see creditworthy borrowers that are likely to make their mortgage payments on-time. You’ll also get a better mortgage rate if your credit and income are good.
What makes a credit or income good? For a mortgage in Vancouver, you’ll want to have a credit score of at least 600, and ideally above 760 to be considered excellent. Having a low credit score reduces your negotiating power and can exclude you from certain lenders or mortgage types. This can lead to a higher interest rate on your mortgage.
As for income, lenders will take into account factors like job stability and your debt-to-income ratio. Most lenders will want to see you have at least two years of job history to show that you’re likely to continue making your mortgage payments long-term. For self-employed borrowers, this might mean having at least two years of self-employment income. Additionally, having other sources of income such as rental property, investments, or retirement funds will give you more leverage when negotiating.
Your income also impacts your debt-to-income ratio, or debt service ratios, which compares your gross monthly income with your monthly payments for your mortgage, housing costs, and debt. The lower the ratio, the better, as you’ll have more breathing room. Most lenders look for a TDS of less than 44% and a GDS of less than 39%. TDS stands for total debt service and GDS stands for gross debt service, with TDS comparing debt and housing costs to income while GDS compares only housing costs to income. In this case, housing costs will include the estimated cost of your new mortgage.
Caption: Downtown Vancouver
Step 3: Check Your Mortgage Affordability
Checking your mortgage affordability online is simple and important. It gives you a clear idea of how much you can realistically afford. Lenders assess your gross debt service (GDS) and total debt service (TDS) ratios to determine your mortgage affordability.
When using online calculators to find out your mortgage affordability, or when asking a mortgage broker or lender, your GDS and TDS is used up to their allowed maximum to find out how much you can borrow at a certain interest rate.
Generally, a higher income allows for a larger borrowing amount, while having more debt payments reduces your borrowing capacity. Knowing how your GDS and TDS ratios can affect your borrowing amount can help guide you in reducing your debt or increasing your down payment to afford the home that you want. Ultimately, it helps you determine the maximum price of a home that you can afford.
When it’s time to explore properties, it's important to have your maximum affordable home purchase price in mind. This ensures that you stay within your budget and make a wise decision without exceeding your, and your lender’s, financial limits.
Step 4: Locate a Neighbourhood
Vancouver has dozens of neighbourhoods, each with a distinct character, with other cities in Metro Vancouver adding more possibilities to choose from. When it comes to selecting a neighborhood in Vancouver, it's crucial to consider what truly matters to you. Think about the schools your children could attend, the convenience of nearby shops and restaurants, and the accessibility of public transit options. Property types and age, as well as demographics and crime rates, can also influence your decision.
Finding the perfect neighborhood that aligns with your lifestyle and preferences is tricky, and this is where a real estate agent can come in handy, especially if you’re considering moving to Vancouver from another city. Real estate agents can provide you with detailed information about a neighborhood which can be invaluable when making your decision, through their local knowledge of the area.
At the bottom of this page, we’ve displayed the latest neighbourhood stats for the City of Vancouver so that you can dive into the details. From demographics to property types and average household incomes, you can use these figures to get an overview of different neighbourhoods in Vancouver.
Comparing Vancouver Neighbourhoods (2016 Census)
Step 5: Estimate Closing Costs
Closing costs are the fees you'll need to pay when purchasing a home. These expenses can include real estate lawyer fees, title insurance, and registration fees. It's important to estimate your closing costs to avoid any unexpected surprises, as they can add up to thousands of dollars that you'll need to pay upfront. Your real estate agent can help you navigate through the closing costs associated with your transaction, ensuring a smooth and transparent process.
If you’re buying a house in Vancouver, you’ll need to pay the provincial BC land transfer tax. This tax, called the property transfer tax (PTT), is a marginal tax of 1% up to 5% based on the purchase price of the home. First-time home buyers can get a full or partial rebate of the tax, while foreign buyers will be charged an additional 20% non-resident speculation tax (NRST).
How Much Are Closing Costs in Vancouver?
Closing costs in Vancouver typically amount to 3% to 4% of your home's purchase price. Brace yourself for the biggest expense: land transfer tax. For an average Vancouver home valued at well over $1 million, this single cost alone already accounts close to 2% of your total purchase price. It's a hefty sum, but an important consideration when entering the real estate market. It’s important to note that closing costs are in addition to your down payment.
Step 6: Get a Mortgage Pre-Approval
A mortgage pre-approval, which you obtain from mortgage lenders, specifies the amount they are willing to lend you at a particular interest rate. It’s a good idea to get a mortgage pre-approval in the home buying process because it helps buyers determine their budget and focus their property search on homes within their price range. Additionally, it demonstrates to sellers that you’re committed to purchasing the home.
By obtaining a mortgage pre-approval, you can secure a favourable mortgage rate for a certain period of time before approval, typically up to 120 days. With this mortgage rate hold, you can confidently search for homes without being rushed, knowing that your mortgage rate remains unchanged.
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Step 7: Find a Real Estate Agent
When it comes to buying a home in Vancouver, working with a real estate agent is a smart move. They'll be your guide, showing you potential homes, negotiating on your behalf, and more. And the best part? It usually doesn't cost you a dime as a homebuyer!
Look for agents with a deep understanding of the Vancouver housing market, a solid track record, and glowing references from happy clients. When you've narrowed down your list, go ahead and interview each one to get a taste of their experience and qualifications.
Step 8: Finding Your New Home
Caption: Suspension Bridge
Get ready to find the home that will make your heart skip a beat! Finding the perfect home in Vancouver is an exciting step in the home buying process. Your real estate agent can show you potential listings, but don't forget to explore home listings yourself. Imagine your dream home - the number of bedrooms and bathrooms, the perfect size, and the ideal distance to work.
Even if you've already chosen a neighborhood, there might be some aspects you're willing to compromise on if affordability is an issue. For instance, a smaller home might mean you're able to purchase in an area that otherwise would have been out of your budget. You might even consider buying a foreclosure home or a fixer-upper that offers potential savings, in return for some time and effort.
Once you've created a shortlist of potential homes, consider having home inspections conducted. This extra step will help you uncover any hidden issues and make an informed decision.
Step 9: Making Offers
When you're ready to make an offer, lean on your real estate agent's expertise to guide you through the process. They'll help you determine the right offer amount and navigate the purchase agreement. Plus, they'll ensure you're protected with contingencies for financing, inspection results, and other unforeseen costs, if you decide to go with a conditional offer. You'll submit an offer to the seller, and if it is accepted, you will enter into a contract with them to buy the home.
Step 10: Closing Date
Once a seller accepts your offer, there's a flurry of paperwork to tackle. From securing financing with a mortgage approval to taking care of closing expenses, signing contracts, and making necessary arrangements, your trusted real estate agent and real estate lawyer will be by your side, guiding you every step of the way.
Get ready to schedule a closing date: this is also when you'll receive the keys. When all the documents are signed, and the funds are transferred, congratulations! The keys to your new home in Vancouver will be handed over to you, marking the start of an exciting new chapter as a proud homeowner.
Vancouver Neighbourhood Profiles and Statistics
Caption: Granville Island
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Disclaimer:
- Any analysis or commentary reflects the opinions of WOWA.ca analysts and should not be considered financial advice. Please consult a licensed professional before making any decisions.
- The calculators and content on this page are for general information only. WOWA does not guarantee the accuracy and is not responsible for any consequences of using the calculator.
- Financial institutions and brokerages may compensate us for connecting customers to them through payments for advertisements, clicks, and leads.
- Interest rates are sourced from financial institutions' websites or provided to us directly. Real estate data is sourced from the Canadian Real Estate Association (CREA) and regional boards' websites and documents.