First-Time Home Buyer Guide
Your complete roadmap to buying your first home in Canada — from saving your down payment to getting the keys.
Step 1: Figure Out What You Can Afford
Before you start browsing listings, you need to know your budget. Here's how:
The 32% Rule (GDS Ratio)
Your monthly housing costs shouldn't exceed 32% of your gross monthly income. Housing costs include:
- Mortgage payment
- Property taxes
- Heating costs
- 50% of condo fees (if applicable)
The 40% Rule (TDS Ratio)
Your total debt payments (housing + car loans + credit cards + student loans) shouldn't exceed 40% of your gross monthly income.
Step 2: Save Your Down Payment
Canada has minimum down payment requirements:
| Home Price | Minimum Down Payment |
|---|---|
| $500,000 or less | 5% of purchase price |
| $500,001 – $1,499,999 | 5% of first $500K + 10% of remainder |
| $1,500,000+ | 20% of purchase price |
Where to Save Your Down Payment
🏆 FHSA (Best Option)
- ✅ $8,000/year contribution limit
- ✅ $40,000 lifetime limit
- ✅ Tax-deductible contributions (like RRSP)
- ✅ Tax-free withdrawals for first home (like TFSA)
- ✅ Best of both worlds
🏦 RRSP Home Buyers' Plan (HBP)
- ✅ Withdraw up to $60,000 from RRSP
- ✅ No tax on withdrawal
- ⚠️ Must repay within 15 years
- ⚠️ Repayment starts 2 years after withdrawal
- 💡 Can combine with FHSA
💡 Pro Tip: Combine FHSA + HBP
You can use both the FHSA ($40,000) and HBP ($60,000) for a combined $100,000 toward your first home. That's a game-changer.
Step 3: Get Mortgage Pre-Approval
Before house hunting, get pre-approved. This tells you:
- How much you can borrow — Sets your budget
- Your interest rate — Usually locked for 90-120 days
- You're serious — Sellers and realtors take you more seriously
What you'll need for pre-approval:
- Proof of income (pay stubs, T4s, NOA)
- Employment letter
- Bank statements showing down payment
- List of debts and monthly payments
- ID (driver's license, passport)
Step 4: The Stress Test
Every Canadian mortgage applicant must pass the mortgage stress test. You must qualify at the higher of:
Your contract rate + 2% or 5.25% — whichever is higher.
Example: If your mortgage rate is 4.5%, you must qualify at 6.5% (4.5% + 2%). This ensures you can handle rate increases.
Step 5: First-Time Buyer Incentives
Home Buyers' Tax Credit (HBTC)
$10,000 non-refundable tax credit = $1,500 in tax savings (at 15% federal rate)
GST/HST New Housing Rebate
If buying a new build, you may qualify for a rebate on the GST/HST portion. Varies by province and price.
Provincial Programs
Many provinces offer land transfer tax rebates for first-time buyers. Ontario offers up to $4,000, BC offers exemptions on homes under $500K.
Step 6: House Hunting & Making an Offer
Once pre-approved, it's time to find your home:
- Get a realtor — Buyer's agents are typically free (paid by the seller)
- Know your must-haves vs nice-to-haves — Be realistic about your budget
- Include conditions — Financing, home inspection, and status certificate (for condos)
- Don't skip the home inspection — $400-$600 that could save you thousands
Step 7: Closing Day
You've found your home and your offer was accepted! Before you get the keys, budget for closing costs:
- Legal fees ($1,500 - $2,500)
- Land transfer tax (varies by province)
- Home inspection ($400 - $600)
- Title insurance ($300 - $500)
- Moving costs ($500 - $2,000+)
- Utility connections and setup
📋 First-Time Buyer Checklist
☐ Calculate your budget (GDS/TDS ratios)
☐ Open an FHSA and start contributing
☐ Save your down payment (FHSA + RRSP HBP)
☐ Check your credit score (aim for 680+)
☐ Get mortgage pre-approval
☐ Find a realtor
☐ House hunt within your budget
☐ Make an offer with conditions
☐ Get a home inspection
☐ Finalize your mortgage
☐ Budget for closing costs (1.5-4% of home price)
☐ Claim the HBTC on your tax return