Steps to Buying Your First Home

Buying your first home in Canada starts with understanding what you can afford.

You'll need to save for a down payment, get mortgage pre-approval, find a suitable property and complete several financial and legal steps before receiving the keys.

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Step 1: Determine How Much House You Can Afford

Start by reviewing your income, existing debt and monthly expenses.

Your budget should account for more than your mortgage payment. Homeownership also involves:

• Property taxes

• Home insurance

• Utilities

• Maintenance and repairs

• Condo fees, if applicable

Consider how much you can comfortably pay each month without sacrificing your emergency savings or other financial goals.

You don't have to spend the maximum amount a lender is willing to approve.

Step 2: Save for Your Down Payment

The minimum down payment in Canada depends on the property's purchase price.

• $500,000 or less: 5% of the purchase price.

• More than $500,000 but less than $1.5 million: 5% on the first $500,000 and 10% on the remaining amount.

• $1.5 million or more: 20% of the purchase price.

For example, buying a $600,000 home requires a minimum down payment of $35,000.

If your down payment is less than 20%, you'll generally need mortgage default insurance. This protects the lender and increases your borrowing costs.

Step 3: Check First-Time Home Buyer Programs

Canada offers programs that can help eligible first-time buyers save for a home.

First Home Savings Account (FHSA)

An FHSA allows eligible Canadians to save for their first home with tax benefits.

You receive $8,000 in contribution room when you open your first FHSA, with a lifetime contribution limit of $40,000.

Contributions are generally tax-deductible, and qualifying withdrawals are tax-free.

Home Buyers' Plan (HBP)

The HBP allows eligible buyers to withdraw up to $60,000 from their RRSP to purchase or build a qualifying home.

You must repay the withdrawal according to the program's rules.

You can use both an FHSA and the HBP for the same home if you meet the eligibility requirements.

You should also check whether your province offers first-time home buyer incentives or land transfer tax rebates.

Step 4: Get Mortgage Pre-Approval

Mortgage pre-approval helps you understand how much a lender may be willing to provide before you start shopping.

A lender or mortgage broker will typically review your:

• Income and employment

• Credit history

• Existing debts

• Down payment

• Financial assets

Compare mortgage rates, repayment terms and prepayment privileges from different lenders.

Remember that pre-approval is not a guarantee. Final approval depends on your financial situation and the property you choose.

Step 5: Start Looking for a Home

Once you know your budget, begin searching for properties that meet your needs.

Consider:

• Neighbourhood and location

• Commute and transportation

• Property condition

• Size and layout

• Property taxes

• Potential maintenance costs

A real estate agent can help you arrange viewings, review comparable sales and understand local market conditions.

Avoid choosing a home based on appearance alone. Major repairs or high ongoing expenses can significantly affect affordability.

Step 6: Make an Offer and Complete Your Due Diligence

When you find a suitable property, you can submit an offer to purchase.

Your offer will typically include the proposed purchase price, closing date, deposit and any conditions.

Common conditions include:

• Mortgage financing approval

• A satisfactory home inspection

• Review of condominium documents, if applicable

A home inspection can identify potential problems with the roof, foundation, plumbing, electrical systems and other major components.

Understand your purchase agreement before signing. Removing conditions can make you legally committed to completing the purchase.

Step 7: Prepare for Closing Costs

Your down payment isn't the only upfront expense.

Closing costs typically range from approximately 1.5% to 4% of the purchase price, although the actual amount depends on the property and province.

These costs may include:

• Legal fees

• Land transfer tax

• Title insurance

• Property appraisal

• Property tax adjustments

• Home inspection fees

If you're buying a newly built home, additional taxes may apply. Eligible first-time buyers may qualify for federal or provincial housing tax rebates.

Keep your closing funds separate from your down payment so you're not caught short.

Step 8: Finalize Your Mortgage and Get the Keys

Before closing, your lender will complete the final mortgage approval process.

You'll also need to arrange home insurance and provide your lawyer or notary with the remaining down payment and closing funds.

Your lawyer or notary will handle the transfer of ownership, register the necessary documents and coordinate payment to the seller.

Once the transaction closes, you'll receive the keys to your first home.

Buying your first home is a major financial commitment. Taking time to establish a realistic budget, understand your mortgage and account for the full cost of ownership can help you avoid unexpected expenses after moving in.