Buying a house in Alberta may seem like an easy task, but the process is anything but simple.
You may be asking yourself hard-hitting questions like, “What do I need to buy a house in Alberta?”.
There’s a myriad of costs and regulations to consider when it comes to buying a home in Alberta. In Alberta, where the cost of living is high and buying a condo or house is expensive, that’s especially challenging for newcomers.
Not only do you need to save up a down payment of (generally) 20%, but also you need to earn a high enough income to cover property taxes and mortgage payments. Thankfully, despite the high cost of living and stringent regulations, there are still a handful of places you can buy a house in Alberta.
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Continue reading to learn the answer to the question, “what do I need to have to buy a house in Alberta?”.
What are the costs of buying a house in Alberta?
The cost of owning a house in Alberta is surprisingly high, at least for first-time homeowners. The average price for a home in Alberta is about $400,000.00, and the average down payment required to buy a house is 20%, which comes out to $80,000.00.
Many different costs are involved with buying a house in Alberta. For example, property taxes can be anywhere from $1,000 to $5,000 monthly, and mortgage payments range from around $2,000 per month and above, depending on your interest rate and other factors like the size of your mortgage.
In addition to those costs, you may need utilities, insurance rates, and renovations to maintain your home. These additional costs can add up swiftly, and it’s essential to prepare yourself financially before buying a house in Alberta.
What do I need to buy a house in Canada?
Here’s what you must have to purchase a house in Alberta or elsewhere in Canada:
You should have at least a 20% down payment
Buying a house in Alberta is no easy feat, and the process can be complicated. There are many important factors to consider, not the least of which is saving up for a down payment. In Alberta, you often need at least 20% of your total home price saved up, which will likely require you to save for many years.
You must have a stable income
One of the most important things to know before buying a house in Alberta is that you must have a stable source of income. It means that you have to work for yourself, be an independent contractor, have a stable job, or run your own business. If you fail to provide a regular and you need a good credit score.
One of the first things you need is to ensure you have a good credit score. If your credit score is below 500, it’s unlikely that you’ll be approved for a mortgage. Speak with your bank or financial institution about improving your credit score before applying for a mortgage.
You need to find an agent
It’s not enough to just find the right home. You also have to find an excellent real estate agent. While it may seem like there are plenty of agents to go around, that’s not always the case. Be sure you find an agent who will be able to help you every step of the way, including with your mortgage, insurance, and other financial needs.
Most importantly, you need to ensure that this person knows the area well. Ask them what their favorite neighborhoods are, the most popular developments for new families, and what neighborhoods have more affordable prices for first-time buyers.
Other things to consider when house hunting
Apart from the above, the following will also help you down the way to purchasing a house:
Check maximum affordability
When applying for a mortgage, the lender will calculate your maximum affordability as a percentage of your gross income.
The calculation considers your monthly household income and expenses, including projected costs like property taxes and mortgage payments.
Buyer’s shouldn’t spend more than 28% of their gross monthly income on housing. Similarly, they shouldn’t spend more than 36% on overall debt, which includes items like education loans, car loan payments, and credit card payments. The 28/36 percent guideline is a tried-and-true home affordability formula that determines how much you can afford to pay each month..
If you have too high of a debt service ratio, it will be difficult for you to make all the necessary payments on time each month, increasing the risk of defaulting on your debts and losing your property.
Locating a city & neighborhood
Where you choose to buy your house in Alberta will depend on what you’re looking for. You may want to live in the suburbs or an urban area with good schools and entertainment options if you have a family.
If you’re single, renting an apartment downtown is often a great way to live comfortably without breaking the bank. For example, Edmonton has many close-knit neighborhoods perfect for families, while Calgary is more focused on high-rise living.
Estimating closing costs
Closing costs are all the expenses associated with acquiring a mortgage, such as legal fees and inspection fees. When buying a house in Alberta, these will likely be your second-biggest expenditure after the down payment.
A quick estimate for closing costs is around 3% or 5% of the purchase price. You should also factor in things like property taxes, utilities, and insurance costs if not included in your mortgage or lease agreement.
Before looking for a new home, you need to speak with a lender to get pre-approved for a mortgage. Even if the interest rates increase post pre-approval, it will not impact your mortgage costs. Once you meet the criteria and your lender approves your application, you can start looking at homes.
Buying a home can be one of the biggest financial decisions you’ll make. And with the average price of a home hitting $500,000 in some cities, it may seem like a distant possibility. But not if you know the right strategies and resources to get you where you want to be.
Luckily, there are plenty of affordable housing options available in both the big and small towns across the province; whether you’re looking to move to a new city or just looking to upgrade your living situation, with the right information, you can make the right decision.