Buying a home for the first time is a significant life event—it’s probably the biggest purchase you’ve ever made. While buying a home is a complex process that may seem overwhelming, you can relax. We’ve rounded up what you need to know as a first-time homebuyer in Canada and resources that can help you along this exciting journey.

First, Organize Expenses

If you’re in the initial phases of buying a first-time home in Canada, you’ll want to know how much home you can afford and be realistic about expenses you may encounter along the way.

The Government of Canada recommends that your monthly housing costs (including mortgage payments and utilities) be no more than around 35% of your gross monthly income. Overall, your monthly total debt responsibility should be less than 42% of your gross monthly income.

Depending on the purchase price of the home, you’ll have to offer a down payment of at least 5% to 20% of the purchase price, says the Government of Canada. The loan you take out on a home to pay the remainder of the purchase price is a mortgage.

Mortgages

Mortgages have various interest rate options. You may want to work with a mortgage broker, who compares lenders and presents you with options you might be interested in. There’s no cost to working with a mortgage broker, since they’re paid a commission from the lender you ultimately choose.

If your down payment is less than 20% of the purchase price, the Government of Canada requires you to purchase mortgage default insurance, also called CMHC insurance. This protects the lender in case you don’t make your mortgage payments on a conventional mortgage loan.

Closing Costs

Other homebuying costs to consider are closing costs. These are additional expenses to purchase your home, which will account for up to 4% of the home’s purchase price. These include:

• Legal costs, to review all your contracts
• Home insurance, which you’ll need in order to get a mortgage
• Land registration
• Adjustment costs, which the seller may require

Inspection and Appraisal Costs

Additionally, you may need to pay for a home appraisal, a home inspection and, of course, moving costs. You can work with a real estate agent who can help you find a home, negotiate a purchase price and fill out your paperwork. Your lender and/or real estate agent can also walk you through the above costs and processes.

It also helps to be aware of organizations and government programs that are available, which can help you lower your costs and help you expand your home ownership options.

Following are resources for those buying a home for the first time in Canada:

Canada Mortgage and Housing Corporation

The Canada Mortgage and Housing Corporation is an organization whose mission is to make housing affordable for all residents. CMHC’s goal is to ensure that everyone in Canada can have an affordable and adequate home by 2030.

One of CMHC’s main programs is CMHC Purchase, which enables buyers to purchase a home with a minimum down payment of 5% using money from a variety of sources, including savings, a gift from a relative or the sale of a property.

You can also visit the CMHC website for resources like:

• Homebuying calculators, which enable you to compare mortgage rates, see how much mortgage you can afford and compare your monthly housing expenses and debt payments to your gross household income
• Homebuying step by step guides, which include tips for how to write an offer and close the deal, how to find the right home and how to maintain your home and protect your investment
• Homebuyers Checklist: A Newcomers’ Guide and Workbook, which you can download, fill out and use as you navigate your homebuying journey so you stay organized and prepared for the first-time homebuying process

The CMHC also has resources for buying a condominium, mortgage fraud tips and homeowner news in Canada. You can search the site based on subjects you’re interested in.

CMHC Programs

Speaking of the CMHC, the organization offers programs that help first-time homebuyers get access to things like mortgage loan insurance and refunds. Check out the following CMHC programs.

CMHC Green Home

Through the program CMHC Green Home, you may be eligible for a refund of up to 25% on mortgage loan insurance premium costs when you buy, build or renovate a home for energy efficiency using CMHC-insured financing. If you’re interested, talk with your mortgage professional.

CMHC Improvement

If you’re interested in purchasing a fixer-upper or want to build a new home, CMHC Improvement provides flexible financing options, including new construction financing and the option for CMHC to manage up to four advances at no cost to the borrower.

CMHC Newcomers

CMHC Newcomers provides CMHC-insured financing with a minimum down payment as low as 5% to borrowers with both permanent and non-permanent residency status. There’s no minimum period of residency required, but non-permanent residents must be legally authorized to work in Canada.

CMHC Self-Employed

For borrowers without predictable income, such as freelancers and self-employed business owners, the CMHC Self-Employed program enables self-employed borrowers to satisfy income and employment requirements for mortgage loan insurance at no additional cost.

Government of Canada Programs

The Government of Canada also has a variety of programs to help first-time homebuyers achieve their homeownership dreams. Research what you might be eligible for that can decrease your costs.

First-Time Home Buyer Incentive Program

The National Housing Strategy provides the First-Time Home Buyer Incentive, a program for first-time homebuyers in Canada.

The benefit of this program is that it can help you lower your mortgage carrying costs and decrease the price you have to pay for your home right now. That means you can purchase a home earlier, instead of continuing to save up for a bigger down payment.

• The program is a shared equity mortgage that provides 5% or 10% of the home’s sales tag to put down toward a down payment.
• When you sell your home within a 25-year window, you’ll pay back that same percentage of the value of your home. So if your home increases in value, you’ll pay back extra toward what you owe.

You can use the National Housing Strategy’s Eligibility and Savings Calculator to confirm you’re eligible for the program.

Qualifications and Requirements

You may be able to qualify if you’ve never purchased a home, didn’t live in a home that you or your common-law partner or spouse owned in the past four years, or you recently experienced the disintegration of a common-law partnership or marriage.

Other requirements include:

• Your total yearly qualifying income doesn’t exceed $120,000 ($150,000 if the home you’re purchasing is in Toronto, Vancouver or Victoria).
• The total borrowed amount is no more than four times your qualifying income (four-and-a-half times if the home you’re purchasing is in Toronto, Vancouver or Victoria).
• You meet the minimum down payment requirements with traditional funds (savings, a non-repayable financial gift from a relative/immediate family member or withdrawal/collapse of a Registered Retirement Savings Plan [RRSP].)

Talk with your lender about the incentive, since they’re the ones who will submit your application for you. 

GST/HST New Housing Rebate

If you want to purchase or substantially renovate a home, you may be eligible for a rebate. The Government of Canada GST/HST new housing rebate program makes certain homebuyers eligible for a rebate when they:

• Purchase new or substantially renovated housing from a builder for their primary place of residence
• Purchase shares in a co-operative housing corporation for the purpose of using a unit in a new or substantially renovated housing complex for their primary place of residence
• Construct or substantially renovate their own home, if the fair market value of the home when the construction is completed is less than $450,000

To get the rebate, you’ll have to submit an application and possibly send invoices and/or proof of occupancy.

Home Buyers’ Amount

The Government of Canada offers homebuyers the ability to claim $5,000 as a non-refundable income tax credit for the purchase of a qualifying home if both of the following apply:

• You or your common-law partner or spouse acquired a qualifying home.
• You didn’t live in another home that you or your current spouse or common-law partner owned in the past four years.

Talk with your tax preparer about this credit to see if you qualify.

Home Buyers’ Plan

If you want to supplement your savings for a mortgage payment, you may be able to use your retirement savings to do so.

The Home Buyers’ Plan (HBP) is a Government of Canada program that allows Canadians to withdraw funds from an RRSP to buy or build a qualifying home for themselves or for a related person with a disability. The withdrawal limit, as of August 2021, is $35,000.

Credit Report and Score Workshop

To get the best rate on your mortgage and improve your lending options, it’s important to have a good credit score.

The Financial Consumer Agency of Canada presents a workshop on understanding your credit report and score. You can access and review the educational materials to learn more about:

• What’s included in your credit report
• How to improve your credit score
• How to identify fraud and errors on a credit report
• What to do if your credit report has errors

Review the workshop for tips. Find your credit score and credit report through one of Canada’s credit-reporting agencies, TransUnion Canada or Equifax Canada.

Find Your Dream Home in Canada