The Complete Guide for First-Time Home Buyers in Ontario

Owning a home is a Canadian dream that lives within many of us. Unfortunately it’s a difficult dream to achieve for first-time home buyers due to the significant hurdles you need to overcome. Buying your first home isn’t as simple as just finding your favourite property online and submitting an offer. It usually takes years of planning and preparation to even get yourself into a position where you can buy a property, and that’s before the search even begins. 

When you get to the point of being able to buy a home in Ontario, a whole new journey begins as you need to learn to navigate the Ontario real estate market, banking system, and a whole bunch of paperwork along the way. While buying a home is an exciting experience, it can also be stressful and anxiety-inducing due to the significant complexities involved, especially in Ontario. Whether you're eyeing a cozy condo in downtown Toronto, a charming townhouse in Ottawa, or a spacious detached in Hamilton, this guide will tell you everything you need to know to become a first-time home buyer. We’ll dive into financial planning, the Ontario real estate market, the home buying process, and the home closing process. By the end of this guide, you’ll be well-equipped to launch your journey into becoming a first-time home buyer. 

Financial Preparation for Home Buying

The first step in the first-time home buying journey is setting yourself up to actually be able to afford the purchase of a home. In the Property Closing Process section, we’ll dive into the different costs that you’ll incur when buying a property (ie. purchase price, Land Transfer Tax, legal costs, and Title Insurance) but for the purposes of your financial planning we don’t need to step into those details just yet. The main things to keep in mind are:

1. You need to save up a sizeable chunk of cash for the up front costs involved in purchasing a home. 

2. You need to get your credit into a great place so that you’re able to have your pick of the litter when it comes to mortgage selection. 

First things first, let’s talk about setting a savings goal.

Setting a Savings Goal as a First-Time Home Buyer

Before you even start to think about your savings plan, you should figure out how much money you’ll need to save up to purchase your first home. The best way to think about this is to come up with your estimated purchase price and work backwards from there. A term you’ll quickly become familiar with on your home buying journey is ‘down payment’. A down payment is the amount of money that you put towards the purchase of your home. This is almost always going to be the biggest cost that you’ll need to save up for. The other notable costs are:

• Land Transfer Tax: this is the tax that the provincial (and sometimes municipal) government applies to your purchase of property. It is calculated based on your purchase price so it can be a significant amount.

• Title Insurance: this is an indemnity insurance that provides coverage to property owners and lenders against financial losses related to the property’s title or ownership. This is also calculated based on your purchase price. 

• Legal costs: these vary widely depending on which provider you move forward with. At Doormat, we provide real estate legal services to first time home buyers for a fee of $979 + HST and we estimate disbursements to be $300 - $500. 

There are some nuances with down payments, but for the purposes of this section, we’ll assume that you’re aiming to save up for a 20% down payment. This means that if you expect to purchase a $500,000 property, you’ll need to save up $100,000 for your down payment alone. That’s already a big chunk of money, but let’s double that purchase price to $1,000,000. For a 20% down payment on a million dollar property, you’ll need to save $200,000, and we haven’t even considered the other costs yet. There is a big difference between those two down payments, which will have a huge impact on how you set up your savings plan. It’s for this reason that it makes sense to start from the purchase price you expect to pay and work back from there.

Once you know your expected down payment, you’ll have a rough idea of how much you need to save in order to make your home ownership dream a reality. To help give you a more accurate picture of how much you need to save, calculate your expected Land Transfer Tax and add another $2,000 - $5,000 for legal costs and Title Insurance. To sum it all up, in order to set your savings goal, you should:

1. Estimate the expected purchase price of your future home.

2. Calculate the down payment based on the purchase price. 

3. Add Land Transfer Tax, Title Insurance, and legal costs to the down payment.

This will give you a rough idea of how much you’ll need to save. Now that we know how much you need to save, it’s time to think about how you’re actually going to save it.

Tips for Saving for a Down Payment

Saving for a down payment (and the other costs), isn’t going to be easy. But there are some key things that you can keep in mind to help the task seem less daunting - build a savings plan, identify sources of income, and take advantage of tax-efficient accounts.

1. Build a Savings Plan 

So you’ve got your savings goal and it’s probably a scary number; it may even seem impossible. Don’t worry, you’re not alone in that feeling. When you’re starting from $0, or close to it, the path to five or six figure savings seems unattainable. That’s where a plan comes into play. The best way to achieve a savings goal is to make consistent and regular contributions to your savings. A plan can start as simply as identifying your savings goal, identifying the target date you want to achieve your savings goal, and dividing your savings goal by the number of months between now and your target date. This will give you a solid idea of how much money you need to save per month to reach your savings goal by your target date.

Monthly savings = Savings goal ($) / Months until target date (#)

For example, if you need to save $100,000 and you want to have it saved in 24 months, you need to set aside $4,167 per month to get there. There you have it, a ‘simple’ plan to save $100,000 in two years. Now you just have to figure out where that money is coming from.

2. Identify & Confirm Sources of the Savings

Now that you know how much you need to save per month, you need to determine where that money is actually coming from. If you believe that you’ll be able to make a large dent in your savings target via a lump sum contribution from someone such as a family member, confirm that belief ASAP! If it turns out that the family contribution you were hoping for isn’t as much of a reality as you expected, it’s better to know now.

Once you’ve figured out any contributions to your savings goal beyond your monthly savings, have a look at your own income sources. Based on your current income and spending, is it realistic to expect that you can save your monthly target? If not, maybe you need to revisit your savings calculation. If that’s not on the table, you’ll need to increase your income or decrease your spending. In short, somethings gotta give. With the exception of a fortunate few, saving to buy a home takes sacrifice and discipline. You will almost certainly need to make some changes to your existing lifestyle, whether that’s by working more or spending less. 

Now that you have an idea where your savings will come from, it’s time to think about how you’re going to best put those savings to work. 

3. Invest via Tax Efficient Accounts

In our simplified calculation of your monthly savings, we assumed no growth in the value of your savings. But here’s the great thing about money, you can make it work for you. In this section, we’ll outline the different investment vehicles you should consider and the types of accounts you can invest into those vehicles. 

Investment Vehicles 

First things first, what is an investment vehicle? Simple put, it is a product used by investors to gain positive returns. Here are some common ones to consider:

• Stocks: shares of ownership in a company.

• Bonds: debt securities issued by governments or corporations.

• Guaranteed Investment Certificates (GICs): an investment that offers a guaranteed rate of return over a fixed period of time.

• Mutual Funds: pooled money from multiple investors used to buy a diversified portfolio of stocks and bonds.

• Exchange-Traded Funds (ETFs): funds that track indexes like the S&P 500 but can be traded on a stock exchange like individual stocks.

Savings Accounts

Now that you know what investment vehicles are and you have a few examples, let’s talk about accounts. There are a number of different types of accounts or plans that you can invest in, some of which have great tax benefits that you can take advantage of as a first-time home buyer.

• Tax-Free Savings Account (TFSA): a flexible investment account that allows you to earn tax-free investment income and make tax-free withdrawals, with contributions not being tax-deductible.

• Registered Retirement Savings Plan (RRSP): a retirement savings plan that offers tax-deferred growth and tax-deductible contributions, with taxes paid only upon withdrawal (with some exceptions).

• First Home Savings Account (FHSA): a savings account specially designed to help you save for your first home, allowing contributions to be tax-deductible and withdrawals to be tax-free when used to purchase a first home.

• Non-Registered Investment Account: an account that does not offer any tax advantages on contributions or earnings, but provides fewer restrictions on withdrawals and contributions compared to registered accounts.

• High Interest Savings Account: a type of bank account that offers a higher interest rate on deposits compared to standard savings accounts

• Standard Savings Accounts: a basic bank account that offers a safe place to store money while earning a modest interest rate on the balance.

Choosing the right combination of investment vehicles and savings accounts will depend on a number of factors such as your goals, timelines, risk tolerance, and income levels. To best determine the best investment approach for you, you should consult with an expert, such as a financial planner. 

Understanding Mortgages for First-Time Home Buyers

As much as one can dream, most people aren’t able to buy a home entirely with their savings. That’s where a mortgage comes into play. A mortgage is a type of loan specifically designed to purchase a property or land. The property that’s purchased is what’s used as collateral for the loan - in simple terms, this means that if a borrower fails to make the required payments, the lender can seize the property to recover their money. 

For most people, a combination of their own savings and the lender contribution via a mortgage is what enables them to actually buy their first home. There are a number of things to keep in mind when thinking about mortgages, but first, let’s start with the basics - what’re the key terms you should know?

Mortgage Terms You Should Know

Mortgages can be complex, so to best evaluate the options that are available to you, you should understand the basic components of a mortgage. Here are the key terms you should be aware of:

• Principal: the initial amount of money borrowed from a lender to buy a home, which gradually gets reduced as payments are made.

• Interest: the cost paid to the lender for borrowing money, calculated as a percentage of the principal.

• Interest rate: the percentage at which interest is charged on the principal amount of the mortgage.

• Amortization period: the total length of time it will take to pay off a mortgage in full through regular payments.

• Term: the duration of time the current mortgage agreement's interest rate and other conditions are fixed, after which it may be renegotiated or the mortgage paid off.

• Payment schedule: The payment schedule dictates how often mortgage payments must be made (e.g., monthly, biweekly) and is agreed upon at the start of the mortgage.

• Down payment: We talked about this one earlier, but let's look at it as it relates to the mortgage. The down payment is the initial sum of money paid upfront by the buyer, typically expressed as a percentage of the home’s purchase price, with the remainder covered by the mortgage.

With a solid understanding of these terms, you’ll be better equipped to evaluate the different mortgage options made available to you when it does come time to buy your first home. Note that it’s not all about getting the lowest interest rate - there are a number of other factors that you should take into consideration when selecting your mortgage. To make the best selection for your needs, you should consult a mortgage professional who can help you think through what’s most important to your unique situation.

Preparing for a Mortgage

In addition to saving up for your down payment and other costs, you’ll need to think long term when it comes to setting yourself up for success with a mortgage. There are a number of things that mortgage providers take into consideration when evaluating your credit-worthiness but here are a few actionable steps you can take to best position yourself.

1. Build Credit

This means that you need to get out there and establish a credit history so that you can illustrate financial reliability over time. So if you’re one of those people that avoid credit cards at all costs and pays cash for everything, let this be your lightbulb moment. While there is sound logic in many other ways to only using cash, it won’t do anything to help build your credit. From a lender's perspective, if they’re handing over five, six, or even seven figures to you in the form of a mortgage they want to see a good track record of your ability to manage credit. 

2. Improve Credit Score

So you’ve gotten past step one and built a foundation of credit. In order to build and improve your credit score, you’ll need to pay your bills on time, responsibly manage credit balances, and ideally, maintain multiple credit accounts. This last part may seem counterintuitive, but the age of your credit accounts has a positive impact on your credit score so keeping them open can be valuable, although this has to be balanced against any fees you might pay. 

3. Keep Outstanding Debts Low

While you want to have a strong credit foundation, you don’t want to be carrying around high credit balances. Your credit utilization and debt-to-income ratio will be something that lenders look at when evaluating your suitability for a mortgage. Keeping these ratios favourable will be helpful in your mortgage application and if they’re not favourable, you may want to consider paying down your larger existing debts, such as car loans. 

4. Generate Regular and Reliable Income

Income is of course a major determinant of your mortgage-worthiness, but not all income is equal! Income stability is a key consideration for mortgage providers as they want an established history of the income you’re claiming. The longer the history of that income, the more confident they’ll be that it will continue. It’s for this reason that regular salaried jobs are often viewed more favourably than freelance or commission based income. It also doesn’t hurt to add additional income streams to your primary income. 

Keep in mind that you’ll be required to share proof of income, so there’s no point in exaggerating your income at any point in the process as you will eventually be required to pony up the proof. 

The trick with the above steps is that they’re not just overnight solutions. You need to establish strong financial indicators over years, rather than days. This is why you need to start preparing for your first home purchase well in advance of when you actually think it will happen.

Types of Mortgages

Once you’ve done all the hard work to build up your credit and cash, it’s time to get yourself a mortgage! Like many parts of the first-time home buying journey, this requires some thinking, research, and expert advice. Beyond considering some of the earlier terms mentioned in this section, you’ll need to decide what type of mortgage you want to get. While there are many different variations of mortgage types, there are two core formats for you to keep in mind.

• Fixed-Rate Mortgage: a mortgage that locks in the interest rate for the entire term of the loan, keeping the monthly payments constant regardless of changes in market interest rates. It delivers stability and predictability because the principal and interest components of the mortgage payment don’t change over time. 

• Variable-Rate Mortgage: a mortgage where the interest is tied to market conditions, usually the lender's prime rate. Depending on the type of variable mortgage you have, either your payment amount can fluctuate or the distribution of your payment between principal and interest. 

There is a lot to consider when selecting a mortgage so it’s very important to have a deep understanding of what matters to you. With that in mind, your mortgage professional can help you find the mortgage that's the best fit for you. As with most other key parts of the first-time home buying process, we highly recommend you consult with a professional in the mortgage space to get advice. Trying to navigate the mortgage landscape on your own can be challenging and can result in costly mistakes. 

Understanding the Ontario Real Estate Market

Now that you’ve saved for all the up front costs involved in a home purchase and are confident in your ability to secure a mortgage, it’s time to start thinking about your actual home search. When buying in Ontario, there is a lot of information available to you but understanding the importance of that information is the real trick. 

Key Factors that Impact Real Estate Markets

Before you even try and understand the Ontario real estate market, you should understand the different factors that impact any real estate market. The below is a brief summary of those factors but know that very smart people build entire careers around understanding the real estate market, so don’t set out to become an expert. Instead, aim to have a general understanding of these factors so that you can have an informed conversation with the experts that will support you along your home buying journey.

1. Economic Indicators: these are key statistics that can either impact the state of the housing market or indicate the direction it might be going in. Major economic indicators to keep an eye on are things like interest rates, GDP growth rates, and employment rates. 

2. Market Supply and Demand: simply put, supply is the number of homes that are available for sale and demand is the number of prospective buyers out in the market. When the supply is greater than the demand, it puts the buyers in the driver's seat and can often drive prices down. When demand is greater than supply, that puts sellers in a position of power and can often drive prices up.  

3. Government Policies and Regulations: the decisions, policies, and regulations that governments employ from municipal levels through to federal can have a major impact on real estate markets. The Canadian government has created incentives that drive activity in the market and regulations that have restricted growth - the key is to understand how current regulations impact you and the market you’re looking to enter.

4. Geographic Factors: proximity to key services such as school, hospitals, worksplaces, etc. is an important factor when buying a home. For this reason, changing geographic landscapes can significantly impact a market. For example, adding a Go Train station to a town that did not have direct transit access to Toronto is very likely to have an impact on the market.

5. Demographic Trends: these focus on changes to the human population and their preferences. For example, the pandemic led to massive changes in how and where people worked, which drove significant demand into rural areas. Changing preferences, experiences, and economic realities of people will always have an impact on real estate markets.

6. Financial Considerations: things affordability, investment returns, and credit availability will always have an impact on the market. An affordable market will attract buyers, high investment returns will attract investors, and readily available credit will create buyers. The opposite can be true for each of those factors. 

With a solid understanding of these factors and how they can impact the market, you’re in a great position to have meaningful and informed discussions with the professionals supporting you in your first-time home buyer journey. But again, it’s important to consult with professionals 

Ontario Housing Market as of August 2024

The best resource to get the cold-hard facts about the state of the market is via the Canadian Real Estate Association (CREA). They release monthly statistics on the Canadian and provincial markets that are available for anyone with access to the internet. Here are some key takeaways from their August 2024 Ontario report. 

• Home sales went slightly down: home sales dropped by 3.7% compared to August 2023. Home sales are still significantly down compared to the five-year average and 10-year average.

• Average price went slightly down: the average price of home sales was $817,915 which is a 1.2% dip from August of last year.

• New listings went up: listings increased by 0.7% compared to August 2023.

• Active listings went way up: the number of active listings is up by 30.9% compared to August 2023.

Keeping an eye on the CREA statistics will help you understand the state of the market and where it might be moving. But as a reminder, there are people out there who have built careers around predicting where the market will go and they’re often wrong. Take the data with a grain of salt and use it as another data input into your home buying consideration, but not the only one. 

Understanding Your Local Market

While understanding the state of the Ontario market will give you a high level view of the market, more localized data, insights, and trends will likely be more valuable to you. To help illustrate this, consider Toronto and Collingwood. While they’re both located in Ontario, their real estate markets will operate very differently due to their geography and demographic trends.  

This is where the guidance and advice of a real estate agent will become particularly valuable. Real estate professionals typically focus on particular cities/towns and sometimes even specific neighbourhoods. They will be able to provide you with insight beyond any information that you can source yourself, especially if it’s not an area that you are already familiar with.

The Home Buying Process

Now that you know how to financially prepare to be a first-time home buyer and you understand the Ontario housing market, it’s time to go through the home buying process. While we’ve broken this down into six steps, don’t be fooled - this can be a lengthy process. Particularly when it comes to house hunting. Depending on the state of the real estate market, this can take a lot longer than people typically anticipate. 

Step 1: Assess Your Needs and Wants

It’s important to have an idea of what you’re looking for before you spend too much time actively searching. Start by listing what you need in your new home — number of bedrooms, parking availability, location preferences, etc. This is especially important if you’re purchasing the property with someone else. You want to make sure that you’re on the same page as your co-purchasers and this up-front conversation can get ahead of any potential discrepancies in what you’re looking for. If you’re not totally sure, check out some open houses in the areas you’re considering. This will kick start the conversation as to what you like and what you don’t like.

Once you have a solid understanding of what you’re looking for, you’ll be well-equipped to start a more purposeful search for your first home. With a clear picture of what you’re looking for, you can set your real estate agent up for success in finding the right place for you. You’ll also save yourself a lot of wasted time and energy looking at places that you’d never actually buy.

Step 2: Find a Real Estate Agent

Choosing the right agent is crucial. They will be the primary relationship that you hold throughout your entire home buying journey. They’ll help surface great options, coordinate your viewings, and most importantly, provide you with guidance and expertise from the start of your home search through until the closing of your first home. 

When searching for an agent, look for someone experienced in the area that you’re looking. That might be as broad as a focus on a particular town or as narrow as a focus on a particular neighbourhood. If you don’t have a specific recommendation from a friend or family member, you’re likely to find a number of agents that service the areas that you’re looking at. Without a direct referral, the best way to initially filter these agents is by what you can find online. How long have they been in business? Do they have great Google reviews? Do they have a strong social media presence? None of these are perfect filters, but they can combine to be quite informative. 

Once you have a shortlist of agents in mind, reach out to them directly. Pay special attention to responsiveness. How promptly your agent responds will mean a lot throughout your home buying journey, so if they’re slow right from the start, that could be a red flag. For those that respond quickly, ask them to walk you through their process and how they will help you find your first home. Also, don’t be afraid to ask them for references. Pay attention to their process and experience but also look for a good personality fit. Is this someone you’ll enjoy spending time with? It better be as you’ll likely be spending a lot of time with them. 

Step 3: Secure Pre-Approval for a Mortgage

We talked at length about what you need to do to position yourself well for a mortgage, now it's time to reap the benefits for all that hard work. Even though you haven’t found a property you want to buy yet, it’s best to get ahead of the mortgage approval process. Getting pre-approved for a mortgage puts you in a stronger position when making an offer. It shows sellers you are serious and have the financial backing to follow through on your bid. This gives you the confidence that you’ll be able to secure a mortgage so you don’t need to worry about including a financing condition in your offer.

Step 4: House Hunting

This is where the fun begins. You get to visit properties, attend open houses, and explore different neighbourhoods to find your home. While this is certainly the fun part of the process, it can also be time consuming and stressful. Especially for first time home buyers, the early days of house hunting can be a big learning curve. Don’t get discouraged if you don’t have success early. It might take a few offers lost to really get clear on how your budget lines up with the reality of the market.

To find houses that might be a good fit, share your criteria with your realtor for them to automatically send you new listings, but be sure to do your own searching too. It doesn’t hurt to have multiple sets of eyes on the market and doing your own research will help you get a better grasp of what’s happening. There are plenty of apps you can use to see listings and within those apps you can set up your own notifications and alerts.

Step 5: Make an Offer

Once you find a house you love, it’s time to make an offer. For this, you’ll work with your agent to put together an offer that includes details like your offer price, deposit amount, and any conditions attached to your offer (eg. a home inspection). This is another opportunity for your agent to shine! They’ll be able to provide advice on the right combination of price, deposit, and conditions (if any) to give your offer the best possible chance of being accepted. 

Be prepared for the fact that not all offer scenarios are as simple as sending your offer to the sellers side and them accepting it. Depending on how the property is priced, how competitive the market is, and the unique preferences of the sellers, there might be some negotiation. It’s possible you could enter into a bidding war with other buyers or be asked by the sellers to reconsider some parts of your offer. This is where having a firm idea of both your budget and risk tolerance is incredibly important. Being clear about your boundaries before making an offer will help prevent you from making an emotional decision on offer day that you could regret later on.

Step 6: Offer is Firm

An offer is ‘firm’ once all existing conditions have been satisfied and the Agreement of Purchase & Sale (APS) has been signed by you and the sellers. A firm offer is binding and can’t be altered or withdrawn easily, unless both parties agree to end it. In contrast, if an offer is still ‘conditional’ there is an opportunity for the buyer or seller to back out of the deal. 

The Property Closing Process

Now that you have a firm offer, it’s time to think about how you’re going to close your purchase. This is where a real estate lawyer comes into play. While you may not realize this as a first-time home buyer, all buyers and sellers in Ontario are required to engage a real estate lawyer to support them with their closing.

Working With a Real Estate Lawyer

Before we step into what you should consider when selecting a real estate lawyer, it is important to clarify that you will not exclusively be working with your real estate lawyer. When you select a real estate lawyer, you’re selecting a team, not just an individual. In the large majority of instances, you will be supported by multiple people at your lawyers company. In fact, your most common point of contact is likely to be a law clerk (at Doormat, this role is called a Client Success Specialist). This is because much of the support provided is administrative in nature and does not require lawyer involvement. This distribution of duties is a good thing as it allows for the right people to focus on the right things. This means that lawyers will be available to support clients with their needs that require legal expertise and law clerks will be able to focus on administration and coordination.

So as you step into choosing a real estate lawyer, remember that you’re not just choosing an individual but the team and the company that supports that individual. This can make a big difference as a great lawyer could have a bad team and vice versa.

How to Choose a Real Estate Lawyer

As most people don’t realize that they’ll need a real estate lawyer to help them get their purchase over the finish line, they don’t take the time to look into different options. The common path is for people to ask a family member or their real estate agent for a recommendation. This is a great way to surface options, but it’s worth doing your own research to see what else is out there and what matters to you. When it comes to real estate lawyers, there’s a wide variety out there and like any service, there are some great options and some not-so-great ones. 

Criteria to Consider When Choosing a Real Estate Lawyer

Like choosing any service provider to work with, a lot of the decision comes down to your own personal preferences and what really matters to you. The key things to consider are:

1. Communication: how well does the lawyer and their team communicate? This is incredibly important as a team with poor communication can make you feel anxious and uncomfortable leading up to your closing day. You want to work with someone that will pick up the phone when you call, answer your emails, and just generally keep you up-to-speed on what’s happening. You can evaluate this by how well they communicate when trying to earn your business. 

2. In-person vs. virtual: would you prefer to meet your lawyer in person for your signing meeting or would you rather complete your signing virtually via something like DocuSign? Decide what you prefer and clarify with your preferred lawyer how they operate. Keep in mind that if you prefer an in-person service, this will limit the options available to choose from.

3. Pricing: how price sensitive are you? The price difference between providers can vary widely. Sometimes the more expensive options provide a better, more white-glove service, but that’s not always the case. 

4. Track record: how can you gather social proof of a quality client service delivered by  a real estate lawyer and their company? This is where referrals from a trusted resource can be valuable, although that is often just one person's perspective. Checking out Google reviews, Reddit threads, and other content online can help you get an idea of what other peoples experiences have been.

5. Lawyer experience: how many transactions has the lawyer closed? While years of experience can be a solid indicator, it does not necessarily define the number of ‘at bats’ a lawyer has had. Be sure to ask the lawyers you’re speaking to how many transactions they have closed, not just the number of years they’ve been in practice.

6. Use of technology: how comfortable are you with technology? At Doormat, our team is supported by our own proprietary app that keeps you informed and organized throughout your closing journey. Some people might love the sounds of this and others may feel the opposite. It’s important to understand how lawyers will deliver their service to you and if that matches up with what you’re looking for.    

These are just a few things for you to think of when choosing a real estate lawyer. The order of importance really is up to you as an individual. While the most important factor is that your lawyer can get your purchase successfully closed, that’s table stakes. How you feel throughout the closing journey, your confidence in your real estate lawyers work, and the value you feel you got out of the service is what really differentiates the providers available to you. 

What Happens Leading up to Closing Day

The large majority of the work to close on your purchase is done in advance of your closing day. During this period, your real estate lawyer will act as the quarterback of your closing, coordinating with yourself, your agent, your lender, and the seller's lawyers to get the property into your hands. The key steps in the process are:

1. Onboarding: at this point, you or your agent will send your closing documents to the lawyers team to review. The real estate lawyers team will also have some questions for you to answer so that they fully understand your personal circumstances and how they might impact your purchase.

2. Title search: your lawyer will search title to ensure that the seller has the right to transfer ownership to you and that there are no outstanding liens, encumbrances, or other legal issues. The purpose of the title search is to identify any potential problems that could affect your rights to the property. 

3. Funding coordination: your lawyer will work with the seller's lawyer to determine the exact amount owed on closing day in order to facilitate the ownership transfer. Your lawyer will then work with you and any other entity involved in the funding of your purchase (ie. your mortgage provider) to ensure that all funds will be available to send to the seller's lawyer on closing day. 

4. Document signing: you will meet with your lawyer to sign all documents required for your purchase. This includes all legal documents and documents required by your lender in order to facilitate the disbursement of your mortgage funds on closing day. Note that some lawyers do this meeting in person and some do it virtually. At Doormat, we’re a completely virtual service so you would meet with your lawyer over a video call and sign via DocuSign. 

Once all documents have been signed and you’ve sent your closing funds to your lawyer, you get to sit back and relax while your lawyer does the rest. At this point, it’s just a matter of getting to the agreed upon closing day where your lawyer will work with the seller's lawyer to transfer ownership into your name.  

What Happens on Closing Day

The day that you’ve been waiting for is finally here! This is the day you not only take ownership of your first home, but the day you actually get the keys to move in. Before we get to that wonderful moment, there are a few things that will have to happen first. Let's break them down.

1. Receive mortgage funds: your lawyer will already have your portion of the closing funds in their trust account, so the next step is to receive the mortgage funds. These funds are almost always sent on the day of closing, but there are a select few financial institutions that send the funds ahead of time.

2. Send out purchase funds: once your lawyer has received the mortgage funds, they will send the total amount owed to the seller's lawyer. 

3. Transfer ownership: now that the seller’s lawyer has the funds in trust, they will work with your lawyer to transfer ownership to you. The seller's lawyer will hold these funds in trust while they work with your lawyer to transfer ownership.

4. Key exchange: once the ownership transfer is complete and you are officially registered on title, you will receive instructions on how to collect your keys. The keys are often left in a lockbox at the property but sometimes they need to be picked up or delivered. 

Don’t let those simply outlined steps lead you to believe that every closing day goes off without a hitch. A common delay is the movement of funds from the mortgage provider to your lawyer and then from your lawyer to the seller’s lawyer. The whole process can’t start until your lawyer receives your mortgage funds and unfortunately when funds are sent to the other lawyer, it doesn’t instantly land in their account. In short, there are lots of parties involved in making closing day a success and any delays can have a ripple effect across the other portions of the closing process.

Summing It All Up

While there is a lot to take away from this guide, the number one thing you should remember is that it takes time and effort to buy your first home. If you know that you want to buy a home in the future, it’s never too early to start planning. Building up your financial foundation to be able to purchase a home will take years for most people and will require diligent planning and discipline. There is also a lot to learn about the nuances of buying a home that, if you put in the time and effort ahead of time, will pay off when you are ready to buy. 

At Doormat, we specialize in helping first-time home buyers close on their property purchase. Our easy-to-use app, experienced lawyers, and friendly support team keep you informed throughout the entire journey and confident in the handling of your closing. Not to mention, our services are completely virtual and our price is 25% lower than the average lawyer. We also have a great track record of delivering incredible client experiences - check out our Google reviews to read for yourself!

If you’d like to get started with us, please don’t hesitate to reach out!