First-Time Home Buyer's Guide to Canada

Are You Ready to Buy?

Financial Readiness Checklist

Before you start house hunting, ensure you're financially prepared:

• Stable Income: Two years of consistent employment or self-employment income
• Good Credit Score: Aim for 680+ for the best mortgage rates (minimum 600 required)
• Down Payment Saved: Minimum 5% for homes under $500,000
• Emergency Fund: 3-6 months of expenses beyond your down payment
• Debt Management: Total debt payments under 40% of gross income
• Closing Costs: Additional 1.5-4% of home price for various fees

Emotional and Lifestyle Readiness

Homeownership is more than a financial decision:

• Are you planning to stay in the area for at least 3-5 years?
• Are you prepared for maintenance responsibilities?
• Do you have time for the home buying process (typically 2-6 months)?
• Have you considered all costs beyond the mortgage payment?

Canadian Government Programs for First-Time Buyers

First-Time Home Buyer Incentive (FTHBI)

The federal government's shared equity mortgage program can help reduce monthly payments:

• Eligibility: Total household income under $120,000 annually
• Amount: Up to 5% for existing homes, 10% for new construction
• Repayment: When you sell the home or after 25 years
• No monthly payments: Government shares in property value changes

Home Buyers' Plan (HBP)

Withdraw up to $35,000 from your RRSP for your down payment:

• Individual limit: $35,000 per person ($70,000 for couples)
• Repayment period: 15 years, starting two years after withdrawal
• Tax implications: No immediate tax on withdrawal if repaid on schedule
• Eligibility: Must not have owned a home in the past 4 years

GST/HST New Housing Rebate

Get a partial rebate on the GST/HST paid for new or substantially renovated homes:

• Maximum rebate: Up to $6,300 for homes under $350,000
• Partial rebate: Available for homes between $350,000-$450,000
• Primary residence: Must be your principal place of residence

Understanding Down Payments in Canada

Minimum Down Payment Requirements

• Under $500,000: Minimum 5% down payment
• $500,000 - $999,999: 5% on first $500,000, 10% on remainder
• $1 million and above: Minimum 20% down payment

Sources of Down Payment Funds

Canadian lenders accept down payments from various sources:

• Personal savings: Most common and preferred source
• RRSP withdrawals: Through the Home Buyers' Plan
• Gifts from family: Must provide a gift letter
• Sale of assets: Stocks, bonds, or other properties
• Employer assistance: Some employers offer down payment assistance

Why Consider More Than the Minimum?

Putting down more than the minimum 5% offers several advantages:

• Avoid mortgage insurance: 20%+ down payment eliminates CMHC premiums
• Lower monthly payments: Smaller mortgage amount
• Better interest rates: Some lenders offer better rates for larger down payments
• More equity: Increased ownership stake from day one
• Stronger offers: Larger down payments make offers more attractive to sellers

Mortgage Default Insurance (CMHC)

When Is Mortgage Insurance Required?

If your down payment is less than 20%, you'll need mortgage default insurance. In Canada, this is provided by:

• CMHC: Canada Mortgage and Housing Corporation (government-backed)
• Genworth Canada: Private mortgage insurer
• Canada Guaranty: Private mortgage insurer

Mortgage Insurance Premium Rates

How Mortgage Insurance Works

• Premium is typically added to your mortgage principal
• Protects the lender, not the borrower
• Required for high-ratio mortgages (less than 20% down)
• One-time premium payment (can be financed)

The Home Buying Process: Step by Step

Step 1: Get Pre-Approved

Before you start shopping, get a mortgage pre-approval:

• Understand your maximum purchase price
• Lock in an interest rate for 90-120 days
• Show sellers you're a serious buyer
• Speed up the final approval process

Step 2: Find a Real Estate Agent

Choose an agent who specializes in your target area:

• Look for experience with first-time buyers
• Check references and reviews
• Ensure they understand your budget and needs
• Verify their licensing and credentials

Step 3: Start House Hunting

Begin your search with a clear understanding of your needs vs. wants:

• Location: Consider commute, schools, amenities
• Size and layout: Current and future needs
• Condition: Move-in ready vs. fixer-upper
• Future potential: Resale value and market trends

Step 4: Make an Offer

When you find the right home, your agent will help you submit a competitive offer:

• Purchase price: Based on comparable sales and market conditions
• Conditions: Financing, inspection, and other contingencies
• Closing date: When you'll take possession
• Inclusions/exclusions: What stays and what goes

Step 5: Home Inspection

Always include a home inspection condition in your offer:

• Hire a certified home inspector
• Attend the inspection to ask questions
• Review the report carefully
• Negotiate repairs or price adjustments if needed

Step 6: Finalize Your Mortgage

Complete your mortgage application with all required documents:

• Employment verification and income documentation
• Bank statements and asset verification
• Property appraisal (ordered by the lender)
• Mortgage commitment and terms

Step 7: Legal Work and Closing

Hire a real estate lawyer to handle the legal aspects:

• Title search and property verification
• Review of all documents
• Coordination of funds transfer
• Registration of the property transfer

Additional Costs to Budget For

Closing Costs (1.5-4% of purchase price)

• Legal fees: $1,000-$2,000
• Land transfer tax: Varies by province (0.5-2.5%)
• Title insurance: $200-$400
• Home inspection: $300-$600
• Appraisal: $300-$500
• Property tax adjustments: Varies

Moving and Setup Costs

• Moving expenses: $500-$3,000
• Utility connections: $200-$500
• Home insurance: $1,000-$2,000 annually
• Immediate repairs/improvements: Variable

Ongoing Homeownership Costs

• Property taxes: 0.5-2.5% of home value annually
• Home insurance: $1,000-$3,000 annually
• Maintenance and repairs: 1-3% of home value annually
• Utilities: $150-$400 monthly
• HOA/condo fees: If applicable

Common First-Time Buyer Mistakes

Financial Mistakes

• Stretching the budget too thin: Leave room for unexpected costs
• Forgetting about closing costs: Budget an additional 1.5-4%
• Making major purchases before closing: Avoid changing your credit profile
• Not shopping around for mortgages: Compare rates and terms

Process Mistakes

• Skipping the home inspection: Always inspect, even for new homes
• Falling in love with the first house: View multiple properties
• Not researching the neighbourhood: Visit at different times and days
• Rushing the decision: Take time to think it through

Legal and Documentation Mistakes

• Not reading contracts carefully: Understand all terms and conditions
• Waiving important conditions: Don't remove protections in competitive markets
• Not having proper legal representation: Hire an experienced real estate lawyer

Tips for Success

Before You Start

• Build and maintain a good credit score
• Save more than the minimum down payment if possible
• Research neighbourhoods thoroughly
• Get pre-approved with multiple lenders
• Understand the local market conditions

During the Process

• Stay within your pre-approved budget
• Don't let emotions drive decisions
• Be prepared to act quickly in competitive markets
• Maintain open communication with your team
• Keep all important documents organized

After Purchase

• Set up a maintenance fund immediately
• Review and update your insurance coverage
• Keep records of all improvements and repairs
• Build relationships with local service providers
• Continue building equity through extra payments when possible