First Time Home Buyer’s Guide

First Time Home Buyer’s Guide

Buying your first home can be a nerve-wrecking process. Here's everything you possibly need to know about purchasing a home.

Downpayment Requirement

The minimum downpayment towards a purchase is 5%; however, this only applies to homes under $500,000.

For homes between $500,000-$999,999, the downpayment requirement is 5% of the first $500,000 and 10% of the remaining balance.

For homes over $1,000,000, most lenders require 20% of the first $1.25M, and 50% of the remaining balance.

Lenders like to see a 90-day history of any source account used for your downpayment, such as savings account, TFSA, investment account, etc.  The statement should clearly state your name and account number. Any large deposits outside of your normal contributions must be explained.

Is some part of your downpayment gifted? Depending on the purpose of your purchase, lenders may accept as much as 100% of your downpayment as gifts from immediate family members. Ask us for a gift letter.

 

Income Requirement

If you are salaried, you will need to provide a Letter of Employment indicating your name, position, pay rate, and guaranteed hours on a company letter head with contact information to confirm employment if needed.

In addition, the lender may want to see: a copy of your latest pay stub, and two years of T4 slips or Notice of Assessments and/or copy of most recent Notice of Assessment to confirm any/no tax balance owing.

If you are self-employed, you will need to provide two years of T1 Generals and Notice of Assessments. The bank may also want to see your financial statements to confirm deposits.

 

Incentives as a First Time Home Buyer

The Government of Canada and the BC Provincial Government has a number of incentives to assist First Time Home Buyers enter the real estate market. Read on to find out what applies to you.

First Time Home Buyers' Program

The First Time Home Buyers' Program reduces or eliminates the amount of property transfer tax you pay when you purchase your first home.

To qualify, you must be:

    • a Canadian citizen or permanent resident
    • have lived in B.C. for 12 consecutive months immediately before the date you register the property or filed at least 2 income tax returns as a B.C. resident in the last 6 years
    • have never owned an interest in a principal residence anywhere in the world at any time
    • have never received a first time home buyers' exemption or refund
    • purchasing the property as your primary residence

Purchasing a Pre-Sale or New Build? You are eligible for a full exemption if the fair market value of your home is $750,000 or less. If your property is between $750,000 and $800,000, you are eligible for a partial exemption.

Purchasing an Existing Home? You are eligible for a full exception if the fair market value of your home is $500,000 or less. If your property is between $500,000 and $524,999, you are eligible for a partial exemption.

For more information, click here.

RRSP Home Buyers' Program

Got a Registered Retirement Savings Plan (RRSP)? As of March 19, 2019, you can withdraw up to $35,000, per each First Time Home Buyer, to help with the purchase of your qualifying home or for someone with a disability.

Under this program, you are considered a first time home buyer if, in the four year period, you did not occupy a home that you or your current spouse or common-law partner owned.

You have up to 15 years to repay your RRSP to avoid being taxed as RRSP income

For more information, use this.

GST Rebate on New Homes

You are eligible for GST rebate if your new home's purchase price is $350,000 or below. The full rebate is 36% of the GST, so the maximum rebate you can obtain is $6,300.

If your home's purchase price is between $350,000 and $450,000, you are still eligible for a partial rebate. Any homes with a purchase price over $450,000 are not eligible for any GST rebate.

For more information, click here.

Line 369 - Home Buyers' Amount

You can claim up to $5,000 for the purchase of a qualifying home in the year if you did not live in another home owned by you or your spouse or common-law partner in the year of acquisition or in any of the four preceding years. This equates to a tax credit of $750.

Home Owner's Grant

The home owner grant reduces the amount of property tax you pay for your principal residence.

You may qualify as a homeowner who is: under 65 years old of age, a senior, a veteran, a person with disabilities, living with a spouse or relative with disabilities, or a spouse or relative of a deceased owner.

The regular grant (basic grant) amount for owners under the age of 65 is $570 in the Capital Regional District, Metro Vancouver Regional District and Fraser Valley Regional District. For all other areas of the province, the basic grant is $770.

If your property is assessed at $1,650,000 or less and you meet certain requirements, you will receive the full grant amount. Properties assessed over that amount may receive a partial grant.

For more information, click here.

 

Closing Costs

Lenders will require to see a minimum of 1.5% of the purchase price in deposit in your bank account in anticipation of closing costs. You can view the closing costs on my previous blog, here.

Ready to buy? Let's get your pre-qualified so you can settle into your dream home.

Leave a Reply

Close Menu