The idea of owning a condo has been on my mind for some time now. As a Zillennial, the prospect of having a place of my own is exciting – and it feels like the logical first step in my homeownership journey. But I had to stop myself from jumping right into browsing listings and envisioning my life as a condo owner.

First, I needed to get a better handle on the financial pathways to buying a condo. And maybe you’re in the same boat too. 

Because let’s get real for a second: Prices in Vancouver are sky-high (the average condo runs for $818K)—plus strata fees, buyer taxes, and carbon taxes. In real dollars, you have to qualify for way more than the sticker price. And that’s just the beginning. 

But here’s a ray of sunshine: interest rates have been on the decline since 2023. And the condo market is currently depressed. This means it’s not as competitive, and while many buyers wait for further rate declines, you’re less likely to encounter competitive offers. 

Now could be the perfect (and strategic) time to dive into the condo market and avoid a potential buying frenzy when rates do come down. But if you’re feeling overwhelmed about how to get there, don’t worry. We’re here to break it down step-by-step.

How much condo can you afford?

Before I started dreaming big, l had to think budget. The first step in your condo-buying journey is to figure out how much you can afford. Going through the pre-approval process will make this clear, as it involves taking a close look at your income, expenses, savings, and yes, debts.  

A general rule of thumb is that your monthly housing costs (including mortgage payments, taxes, and insurance) should not exceed 39% of your gross monthly income. My research uncovered plenty of online calculators that help in estimating this, but sitting down with a financial advisor can also provide valuable insights tailored to your situation. 

Ryan McKinley, Senior Mortgage Development Manager at Vancity, explains, “You can have two people with the same amount of money: one is an avid saver, and the other eats out every night. The approval for them is the same—but the mortgage becomes affordable for one and not the other. With the help of your mortgage specialist,” he continues, “you can figure out how to live comfortably with your mortgage payment.”

Mortgage pre-qualification vs. mortgage pre-approval

Getting pre-qualified and pre-approved for a mortgage are two steps that often get confused, but they play different roles in your homebuying process. News to me.

• Pre-qualification is a preliminary step in which you provide your financial information to a lender, and they give you an estimate of what you might be able to borrow. It’s a good way to get a general idea of your price range.

Pre-approval is a more in-depth process in which the lender verifies your financial information and commits to lending you a certain amount of money, pending a property appraisal and other conditions. Having a pre-approval letter can give you a competitive edge when making an offer on a condo.

Saving for a down payment

How much should you save for a down payment? Ideally, you should aim for 20% of the condo’s purchase price. This will help you avoid private mortgage insurance (PMI) and potentially secure better interest rates. However, many aspiring first time buyers find this goal daunting (myself included.) There are mortgage options available with lower down payment requirements. The key is to start saving early and explore programs designed to help first time homebuyers such as the First Home Savings Account.

Planning for costs beyond the purchase price

During my research, I had a light bulb moment: Buying a condo requires much more than just the down payment. First let’s consider the typical monthly costs:

• Mortgage payments: Principal and interest based on your loan terms.
• HOA (Homeowners Association) fees (aka strata fees): These cover the cost of maintaining common areas and amenities.
• Utilities: Water, electricity, gas, and other services.
• Maintenance: Regular upkeep and any necessary repairs.

HOA fees typically cover routine maintenance, but special assessments can arise for major repairs or improvements. These numbers can add up, so make sure to set aside savings for these unexpected expenses.

And here are just some of the additional costs to budget for:

• Closing costs: Typically 2-5% of the purchase price, covering fees like appraisal, title insurance, and attorney fees.
• Moving expenses: Don’t forget to account for the cost of moving your belongings to your new home.
• Home inspection fees: Get a condo inspection to uncover potential issues before you ink those papers.

All these factors made me realize just how crucial it is to plan and budget for a condo carefully, so I can step into home ownership with confidence and peace of mind.

Understanding your financing options

We can’t ignore the elephant in the room: when it comes to condo ownership, knowing your stuff about mortgages is key. There’s a lot to learn, and it can be overwhelming, but understanding some of the basics is a good first step. 

Types of mortgages

There are two types of mortgages you can look into, each with its pros and cons:

• Conventional mortgages require a minimum down payment of 20% or more of the property purchase price and offer greater flexibility. But they also require a significant chunk of savings, which is unattainable for many buyers.
• Insured (or high-ratio) mortgages allow for a down payment as low as 5%. And although having less equity means you’ll be paying more in interest over the long term, the smaller down payment enables more people to become homeowners.

It’s important to find out what type of mortgage suits your needs best. A trusted mortgage advisor can help you narrow it down. It’s also good to think about how interest rates significantly impact your monthly mortgage payments and the total amount you pay over the life of the loan. Even a small difference in your rate can add up to thousands of dollars in additional costs. Keeping an eye on market trends and locking in a good rate can save you a lot of money over the longer term or your amortization period.

Let’s talk financial health and credit

When I embarked on this journey to determine how viable condo ownership was for me, I realized that I need a sustained, healthy financial situation. Here are a couple of the elements I looked into. 

How your credit score affects your mortgage

I had already started taking my credit score seriously, but I doubled down even more on my efforts once I learned that my credit score was a major factor in determining whether I’ll qualify for a mortgage. A higher credit score usually means better loan terms, too. So be sure to check your credit report for errors (you can request a copy through Equifax) and take steps to improve your score if needed—like paying down debts and making all payments on time.

How you can legally and financially protect yourself

With big decisions come big responsibilities. This means you must set yourself up for success by knowing your rights and what to do when things don’t go in your favour. Are you protected enough before making this decision?  To be fully protected, consult with legal and financial professionals. A real estate lawyer can clarify your purchase agreement and spot potential issues, while a financial advisor can help you assess how the condo fits into your overall financial plan and budget.

Understand your condo purchase agreement and strata documents

A condo purchase agreement outlines the terms and conditions of your purchase. It includes important details like the purchase price, closing date, and contingencies. Review this document carefully, along with the strata documentation, which reveals important data such as historical meeting minutes and the financial health of the condo, and consider having a real estate attorney help you understand your rights and obligations. 

A real estate attorney can help review documents, negotiate terms, and ensure the transaction complies with all legal requirements. When it comes to big, complex transactions, it’s nice to have their expertise to rely on.

Choosing the right lender or mortgage broker

Once you have clarity on the right mortgage type for you and your credit score health is good, the next step is choosing a lender or mortgage broker. While I was searching for the one, my criteria was someone who offers competitive rates, clear communication, and excellent customer service. Ask for recommendations from friends or family and read reviews online to gauge their service reputation. Don’t hesitate to shop around and compare offers from multiple lenders, be sure to choose one you can build a long-term relationship with.

With time and diligence, buying a condo is, indeed, possible

Buying a condo is a significant financial commitment, but I’m learning that with careful planning and informed decision-making, it’s totally within reach. With the right knowledge and support from mortgage specialists, you can turn the dream of owning a condo into reality. And understanding the financial pathways to condo ownership can help you navigate this process with gusto. 

Hey, maybe we’ll get there together! Contact a Vancity mortgage specialist for personalized advice on getting approved for a mortgage that fits your finances.