Buying a home is one of the biggest financial decisions you'll make. For first-time home buyers especially, the process can feel overwhelming: How much can you afford? How much do you need for a down payment? What will your mortgage payment be? And what other costs should you expect? The good news is that you don't have to figure everything out at once. Before you start attending open houses or making offers, take time to understand your finances, research the housing market and learn how the home-buying process works.
One of the biggest mistakes first-time buyers can make is starting with the question:
“How much will the bank lend me?”
Instead, start with:
“How much can I comfortably afford?”
These aren't necessarily the same thing.
Your home-buying budget needs to account for much more than your mortgage payment. Consider:
The Financial Consumer Agency of Canada notes that housing costs should generally be no more than about 39% of gross monthly income and total debt load no more than about 44%, although qualification depends on your individual circumstances and lender requirements. These ratios can help you understand mortgage qualification, but they shouldn't automatically become your personal spending target. A mortgage payment that a lender considers manageable may still feel uncomfortable within your overall lifestyle.
Before shopping for a home, calculate your estimated:
Mortgage + property taxes + insurance + utilities + maintenance + other debt payments = your real monthly housing cost
This gives you a much more realistic picture of what homeownership will cost.
Your down payment is the amount you contribute toward the purchase price of the home. In Canada, the minimum down payment depends on the home's purchase price.
Currently, the minimum is generally:
| Home purchase price | Minimum down payment |
|---|---|
| $500,000 or less | 5% |
| $500,000 to $1.5 million | 5% of the first $500,000 + 10% of the portion above $500,000 |
| $1.5 million or more | 20% |
For example, a $600,000 home would require a minimum down payment of $35,000 under these rules: 5% of the first $500,000 ($25,000) plus 10% of the remaining $100,000 ($10,000). If your down payment is less than 20%, you'll typically need mortgage loan insurance. Mortgage loan insurance protects the lender—not the homeowner—and the premium can add to the overall cost of borrowing.
Not necessarily. A larger down payment can reduce your mortgage and potentially reduce interest costs, but you shouldn't drain your savings just to put more money into the home. You'll also need money for closing costs, moving expenses, immediate repairs and unexpected expenses. The right down payment depends on your overall financial situation.
If you're a first-time home buyer, one of the most important savings tools to understand is the First Home Savings Account (FHSA). An FHSA is designed to help eligible first-time home buyers save for a qualifying home. Contributions are generally tax-deductible, and qualifying withdrawals to purchase a home are tax-free. The annual contribution limit is currently $8,000, subject to the applicable rules. The earlier you understand your eligibility and open an FHSA, the more opportunity you may have to build savings within the account's rules. If you're saving for your first home, talk with a qualified financial professional about whether an FHSA fits your situation.
Another program worth knowing about is the Home Buyers' Plan (HBP). The HBP allows eligible individuals to withdraw money from their RRSP to purchase or build a qualifying home. The current withdrawal limit is $60,000. HBP withdrawals are subject to repayment requirements, so don't think of this as simply taking money out of your retirement savings permanently. The FHSA and HBP can potentially be used for the same qualifying home if you meet the applicable requirements. Because these programs have specific eligibility and repayment rules, review the current Government of Canada requirements before making a withdrawal.
Your credit history is an important part of the mortgage process. Before applying, review your credit report and make sure the information is accurate. Also look at your existing debt. Lenders consider factors such as your income, debts, credit history and ability to make mortgage payments when assessing a mortgage application. Mortgage qualification may also involve a stress test. If you have significant high-interest debt, reducing it before applying for a mortgage may strengthen your overall financial position. But don't automatically put every dollar toward debt. You also need to maintain enough savings for your down payment, closing costs and emergencies.
Instead of asking:
“How can I get approved for the biggest mortgage possible?”
ask:
“What mortgage payment allows me to continue saving and comfortably handle unexpected expenses?”
That's a much healthier foundation for homeownership.
Your down payment isn't the only cash you'll need when purchasing a home.
Depending on the property and transaction, you may need to budget for:
The Financial Consumer Agency of Canada recommends planning for approximately 1.5% to 4% of the purchase price for upfront or closing costs, although your actual costs will vary. For example, on a $600,000 home, 1.5%–4% would represent approximately $9,000–$24,000 in additional costs. That is money you need to account for separately from your down payment.
A mortgage isn't simply a monthly payment.
When comparing mortgages, look at:
A lower rate isn't necessarily the only factor that matters. For example, two mortgages with similar rates may have different prepayment privileges or penalties. Think about your expected financial situation during the mortgage term—not just today's payment.
These two terms are often confused. Mortgage term is the period your current mortgage agreement and interest rate apply. Amortization period is the total amount of time it would take to repay the mortgage based on the scheduled payments. Understanding the difference can help you compare mortgage offers more effectively.
A mortgage pre-approval can help you understand how much you may be able to borrow and can give you a clearer price range when you begin shopping. But a pre-approval is not the same as a guarantee that your final mortgage will be approved. And more importantly, it doesn't mean you should spend the maximum amount available. Set your own comfortable home-buying budget before you start shopping. This can help prevent the excitement of finding a home from pushing you beyond what you originally planned to spend.
When you find a home you love, it's easy to focus on the kitchen, bedrooms and backyard. But look beyond the property itself.
Research:
A professional home inspection can identify potential problems that aren't obvious during a showing.
The Government of Canada recommends having a professional home inspection and notes that buyers can consider making an offer conditional on a satisfactory inspection.
An inspection doesn't guarantee that a home will never have problems, but it can provide valuable information before you commit to the purchase.
Buying a home involves more than agreeing on a price.
Your offer may include conditions relating to matters such as:
The exact terms of an offer can have significant legal and financial consequences. Before signing an agreement, make sure you understand what you're agreeing to and consider getting professional legal and real estate advice. The terminology and process can also vary by province, so don't rely on advice written for buyers in another country.
This is particularly important for Canadian buyers.
Getting the keys is only the beginning. Once you're a homeowner, you'll need to budget for ongoing expenses.
Property taxes can represent a significant annual expense and may increase over time.
Mortgage lenders generally require appropriate home insurance, and premiums vary depending on the property and coverage.
Your home will eventually need maintenance.
Set aside money for expected and unexpected expenses such as:
Remember to budget for:
If you're purchasing a condominium, monthly condo fees can cover certain shared expenses and amenities. Make sure you understand what is included and review the condominium corporation's financial and status information before purchasing.
Before making an offer, make sure you've considered:
You'll generally need money for a down payment plus closing and other upfront costs. The minimum down payment depends on the home's purchase price. You should also maintain enough savings to cover moving costs, immediate expenses and emergencies.
For homes priced at $500,000 or less, the minimum is generally 5%. For homes between $500,000 and $1.5 million, the minimum is 5% of the first $500,000 plus 10% of the portion above $500,000. Homes priced at $1.5 million or more generally require a minimum 20% down payment.
No. You can generally purchase a home with less than 20% down if you meet the applicable requirements, although you'll typically need mortgage loan insurance.
A First Home Savings Account is a registered account designed to help eligible first-time home buyers save for a qualifying home. Contributions are generally tax-deductible and qualifying withdrawals are tax-free, subject to the applicable rules.
Under the current Home Buyers' Plan, eligible individuals can withdraw up to $60,000 from their RRSP to buy or build a qualifying home, subject to the program's rules and repayment requirements.
The Financial Consumer Agency of Canada suggests planning for approximately 1.5% to 4% of the home's purchase price for upfront or closing costs, although your actual costs will vary.
Reducing high-interest debt can improve your financial position, but you shouldn't necessarily use every dollar of savings to eliminate debt. You'll also need funds for your down payment, closing costs and emergency savings. Consider your complete financial picture before making a decision.
There isn't one universal credit-score number that guarantees mortgage approval. Lenders consider your credit history along with income, debts and other factors when evaluating a mortgage application.
A pre-approval can help you understand how much you may be able to borrow and establish a realistic shopping range. However, treat it as an estimate of borrowing capacity rather than a reason to spend the maximum amount available.
Buying a home is a major financial commitment, but preparation can make the process much more manageable. Start by understanding your budget, saving for your down payment and closing costs, reviewing your credit and debt, and learning about the mortgage options and first-time home buyer programs available to you. Most importantly, don't rush. The goal isn't simply to get into the housing market.
The goal is to become a homeowner in a way that supports your long-term financial well-being.
If you're preparing to buy a home, talk with a YNCU financial professional about your mortgage and financial planning options.
This article is for general educational purposes only and does not constitute mortgage, financial, legal, tax or real estate advice. Mortgage rates, lending criteria, government programs, eligibility requirements and other rules can change. Always verify current requirements and speak with qualified professionals about your individual circumstances.