Buying a House in Canada: 7-Step to Your First Home / Acheter une maison au Canada : 7 étapes pour votre première maison

Buying a home for the first time is an exciting milestone, but it can also be a daunting process filled with many questions and uncertainties. This comprehensive guide aims to simplify the journey for first-time home buyers in Canada. From assessing your readiness to buy a home to navigating the complexities of the real estate market, we’ve got you covered with essential steps and helpful tips to make the process smoother and more manageable.

2027 Home Buying Update: Canada’s housing and mortgage policies continue to evolve. Important changes include the increased insured mortgage price limit of $1.5 million, expanded 30-year mortgage amortization eligibility, the First Home Savings Account (FHSA), the increased Home Buyers’ Plan withdrawal limit, and the new First-Time Home Buyers’ GST/HST Rebate. This guide includes the latest announced federal rules and available home-buying programs.

Are You Ready to Buy a House in Canada?

Before buying a home, you need to ask yourself the hard question: Are you ready to buy a house?

Homeownership is a big responsibility, and it’s crucial to ensure that you have your financial affairs in order before taking charge of an asset that could be worth half a million dollars or more. Prior to embarking on the journey of homeownership, consider the following questions:

Do You Have a Down Payment?

The first crucial step in buying a home is ensuring that you have a sufficient down payment. In Canada, the minimum down payment required varies depending on the purchase price of the home:

• For homes priced at $500,000 or less, a minimum down payment of 5% is required.
• For homes priced between $500,000 and $1.5 million, a down payment of 5% on the first $500,000 and 10% on the remaining portion is required.
• For homes priced at $1.5 million or more, a minimum down payment of 20% is required.

These minimum down payment rules apply to eligible properties and borrowers. Buyers who put down less than 20% generally need mortgage loan insurance, subject to the applicable requirements.

Saving for a down payment can be challenging, but it’s an essential step in the home-buying process. Here are some additional tips to help you save effectively:

Create a Budget: Track your income and expenses to identify areas where you can cut back and save more. Budgeting apps can be helpful tools for keeping your finances organized.

Open a Separate Savings Account: Keep your down payment funds in a separate account to avoid the temptation to spend them. Look for accounts with higher interest rates to maximize your savings.

Automate Savings: Set up automatic transfers from your main account to your savings account to ensure consistent savings. Treat these transfers like any other bill that you must pay regularly.

Take Advantage of Government Programs: Look into programs like the First Home Savings Account (FHSA) and Home Buyers’ Plan (HBP) to help boost your home-buying savings. These programs offer tax advantages and can make it easier to accumulate money for your first home.

Don’t know what we’re talking about? Learn about down payments here.

Is Your Income Steady?

Lenders need assurance that you have a stable and reliable income to cover mortgage payments. Ensure that your income is steady and sufficient to meet the lender’s requirements. You can use online mortgage calculators to estimate how much you can afford based on your income and expenses.

When evaluating your income, consider the following factors:

Employment Stability: Lenders prefer borrowers with a stable employment history. If you’ve recently changed jobs, it might be beneficial to wait until you have a few months of consistent income before applying for a mortgage.

Additional Income Sources: Include any additional sources of income, such as freelance work, rental income, or investments. Documenting these sources can strengthen your mortgage application.

Debt Service Ratios: Canadian mortgage lenders generally use Gross Debt Service (GDS) and Total Debt Service (TDS) ratios to assess your ability to manage mortgage payments and other financial obligations.

• Gross Debt Service (GDS): Your monthly housing costs should generally not exceed 39% of your gross household income.
• Total Debt Service (TDS): Your total monthly debt obligations, including housing costs and other loans, should generally not exceed 44% of your gross household income.

These are general qualification guidelines. Lenders may apply different requirements depending on the mortgage product, borrower profile and applicable lending rules.

What Are Your Local Market Conditions?

Real estate markets can vary significantly across Canada. Research local market conditions in the area where you plan to buy. Are home prices rising or falling? Is there a high demand for homes? Understanding the market can help you make informed decisions and potentially negotiate better deals.

To assess local market conditions, consider the following steps:

Monitor Market Trends: Keep an eye on local real estate market trends. Are home prices increasing, stabilizing, or decreasing? This information can help you time your purchase and make strategic decisions.

Consult with Real Estate Professionals: Real estate agents, appraisers, and market analysts can provide valuable insights into local market conditions. They can help you understand current trends and identify opportunities.

Explore Neighborhoods: Visit different neighborhoods to get a feel for the area. Look for factors like proximity to amenities, schools, public transportation, and overall safety. Consider the long-term potential of the neighborhood, as it can impact the value of your investment.

Are You Ready to Settle Down?

Buying a home is a long-term commitment. Consider your personal and professional circumstances to ensure you’re ready to settle down in a specific location. Think about factors like job stability, family needs, and lifestyle preferences.

Ask yourself the following questions:

Job Stability: Are you confident in your current job or career? If there’s a possibility of relocation or job change in the near future, renting might be a more flexible option.

Family Planning: If you have or plan to have a family, consider factors like school districts, proximity to parks, and family-friendly neighborhoods. Your home should accommodate your family’s needs and future growth.

Lifestyle Preferences: Reflect on your lifestyle and how it aligns with homeownership. Do you prefer urban living with access to cultural activities, or do you value a quieter suburban or rural setting? Ensure the location and type of home match your lifestyle preferences.

Long-Term Goals: Consider your long-term goals and how homeownership fits into them. Are you looking to build equity, have a stable living environment, or invest in property? Make sure your decision aligns with your future plans.

How to Buy a House in Canada?

The steps on how to buy a house are the same whether you’re buying a house, a townhouse, or a condo. For simplicity, our examples will focus on how to buy a fully detached home.

Step 1: Save for a Down Payment

Saving for a down payment is the initial stage in buying a house. In Canada, the minimum down payment depends on the home’s purchase price:

• For homes priced at $500,000 or less, you need at least 5%.
• For homes priced between $500,000 and $1.5 million, you need 5% on the first $500,000 and 10% on the remaining portion.
• For homes priced at $1.5 million or more, you need at least 20%.

If you haven’t saved for a down payment yet, you can start by setting aside money each month, but it may take several years to accumulate enough funds. Alternatively, you can consider utilizing the Home Buyers’ Plan, which allows eligible first-time home buyers to withdraw up to $60,000 from their RRSP without immediate tax consequences, provided they follow the program’s conditions.

Another option is to explore other sources of funding, such as a monetary gift from a family member. Lenders may request documentation confirming that the money is a genuine gift rather than a loan.

Accumulating a substantial down payment is typically advisable because it offers several advantages, including:

• Paying smaller mortgage default insurance premiums
• Building more equity in your home
• Having a lower monthly mortgage payment
• Paying less interest over the life of your mortgage

It’s important to note that aside from the down payment, you’ll also need to save money for closing costs. A common planning estimate is approximately 1.5% to 4% of the home’s purchase price, although the actual amount depends on your location, property price and circumstances.

For example, when purchasing a $500,000 home in Toronto, Ontario, the combined provincial and municipal land transfer taxes are approximately $12,950 before eligible first-time home buyer rebates.

For the same $500,000 purchase outside Toronto, the Ontario provincial land transfer tax would be approximately $6,475 before eligible rebates.

The following is a list of common closing costs you should expect to pay:

• Land Transfer Tax: Varies by province and municipality.
• Lawyer Fees: Often approximately $1,000 or more.
• Title Insurance: Often several hundred dollars.
• Home Inspection: Often several hundred dollars.
• Appraisal Fees: May be required by your mortgage lender.
• Mortgage Default Insurance: May apply if your down payment is less than 20%.
• Property Tax Adjustments: You may need to reimburse the seller for prepaid property taxes.
• Moving Expenses: Include transportation, movers and utility setup costs.

Remember that these are planning estimates. Always request a breakdown of your expected closing costs from your real estate lawyer before finalizing your purchase.

Step 2: Get Organized

While saving for your home down payment, it’s a good idea to organize your finances and paperwork. This can be especially helpful as you may spend several months saving for your down payment. During this time, you can focus on the following tasks:

Pay Down Your Debt: If you have any credit card debt, student loan debt, car loans, or a line of credit with a balance, it’s a good idea to pay them off. Lowering your debt levels will have a positive impact on your credit score and debt service ratios, which are calculations that lenders use to determine how much you can comfortably borrow for your mortgage.

Prepare Your Documentation: When applying for a mortgage, you’ll need to provide a lot of paperwork. Preparing your documentation ahead of time will make the process smoother and faster. This can be particularly helpful if you find your dream home and need to move quickly through the mortgage approval process.

Here’s a checklist of the documentation you’ll need when buying a house:

• Proof of current employment, such as a T4, pay stub, or a letter from your employer
• Documentation of any other sources of income you have, such as investments or business income
• Savings and investment statements, often covering the past 90 days
• If you plan to use the Home Buyers’ Plan, proof of your RRSP withdrawal
• If you’re receiving a financial gift from a family member, a letter confirming that the gift is not a loan
• A void cheque or banking information for mortgage payments
• An inventory of all other debts and assets, such as cars and car loans
• Identification and other documents requested by your mortgage lender

Step 3: Check for Rebates and Grants

To ensure that you don’t make the home-buying process more expensive than necessary, check if you qualify for any rebates, tax credits, or government programs. Several programs are available to help eligible first-time home buyers in Canada, including:

1. First Home Savings Account (FHSA)

The First Home Savings Account (FHSA) is a registered savings account designed to help eligible Canadians save for their first home.

The FHSA combines some of the tax advantages of an RRSP and a TFSA.

• Annual contribution limit: $8,000.
• Lifetime contribution limit: $40,000.
• Contributions are generally tax-deductible.
• Qualifying withdrawals to purchase a first home are tax-free.

Unused contribution room can be carried forward, subject to the program’s rules. However, FHSA contribution room only begins accumulating after you open your first account.

You must meet the applicable eligibility requirements to open an FHSA and make a qualifying withdrawal.

2. Home Buyers’ Plan (HBP)

The Home Buyers’ Plan allows eligible individuals to withdraw money from their Registered Retirement Savings Plan (RRSP) to purchase or build a qualifying home.

The withdrawal limit was increased from $35,000 to $60,000 in 2024.

Important details include:

• Maximum withdrawal: $60,000 per eligible individual.
• Qualifying withdrawals are not immediately taxable.
• Withdrawn amounts generally need to be repaid over 15 years.
• Eligible buyers may use the HBP together with an FHSA for the same qualifying home.

For first HBP withdrawals made between January 1, 2022, and December 31, 2025, the temporary repayment relief provides a five-year grace period before repayments begin. For withdrawals made from January 1, 2026, onward, the normal two-year grace period applies.

3. First-Time Home Buyers’ Tax Credit (Home Buyers’ Amount)

Eligible first-time home buyers can claim the federal Home Buyers’ Amount when filing their income tax return.

The maximum eligible amount is $10,000, which can provide up to $1,500 in federal non-refundable tax relief at the 15% credit rate.

This is not a $10,000 cash payment. It is a non-refundable tax credit that reduces the federal income tax you owe, subject to the applicable rules.

4. Ontario and Toronto Land Transfer Tax Rebates

First-time home buyers purchasing a qualifying property in Ontario may qualify for a provincial land transfer tax refund of up to $4,000.

If you purchase an eligible property in Toronto, you may also qualify for a separate municipal land transfer tax rebate of up to $4,475.

These rebates have separate eligibility requirements. Buyers should confirm their eligibility and claim procedures with their real estate lawyer.

5. GST/HST New Housing Rebate

Eligible buyers of newly constructed or substantially renovated homes may qualify for the existing GST/HST New Housing Rebate.

The rebate may help recover some of the GST or federal portion of the HST paid on an eligible new home, subject to purchase price, occupancy and other requirements.

6. First-Time Home Buyers’ GST/HST Rebate

A new federal First-Time Home Buyers’ GST/HST Rebate provides additional tax relief for eligible first-time buyers purchasing or building a qualifying new home.

Under the announced program:

• Eligible new homes valued at $1 million or less may qualify for a rebate of 100% of the GST or federal portion of the HST, up to a maximum of $50,000.
• For homes valued between $1 million and $1.5 million, the rebate is gradually reduced.
• Homes valued at $1.5 million or more do not qualify for this particular rebate.

The rebate is subject to eligibility conditions, including first-time buyer status, the home’s use as a primary residence, and applicable purchase or construction agreement dates.

Eligible Ontario buyers should also check how the federal rebate interacts with the provincial portion of HST and other applicable new housing rebates.

Important: The First-Time Home Buyer Incentive (FTHBI), which previously offered a shared-equity mortgage with the federal government, has been discontinued. It is no longer accepting new applications.

Step 4: Shop Around for a Great Rate

When you’re looking to buy a home, it’s important to shop around for the best mortgage rate. Just as you wouldn’t settle for the first car insurance quote you receive, you shouldn’t settle for the first mortgage offer you’re given. Finding the lowest mortgage rate can save you thousands or even tens of thousands of dollars in interest over the life of your mortgage. Luckily, a mortgage broker can help make the process easy.

By filling out just one application, a mortgage broker can shop around with multiple lenders on your behalf and return with available offers and rates. Still unsure of the benefits of using a mortgage broker? Consider the difference between securing a competitive mortgage rate available today versus the standard posted rates at major banks for a $500,000 home.

Even if a mortgage broker can’t find you a better rate, they may still be able to offer expert, personalized advice. Some brokers are compensated by lenders, while others may charge fees depending on the mortgage arrangement.

When comparing mortgage offers, don’t focus only on the advertised interest rate. Consider the following:

• Fixed versus variable interest rates
• Mortgage term and amortization period
• Prepayment privileges
• Mortgage portability
• Early repayment penalties
• Discharge and administrative fees
• Payment frequency options
• Whether the mortgage is open or closed

Understand Canada’s Mortgage Stress Test

Before approving a mortgage, federally regulated lenders generally require borrowers to pass Canada’s mortgage stress test.

The stress test checks whether you can afford mortgage payments at a qualifying interest rate higher than your actual contracted mortgage rate.

For most applicable mortgages, the qualifying rate is the higher of:

• Your contracted mortgage interest rate plus 2 percentage points.
• The minimum qualifying rate of 5.25%.

For example, if your negotiated mortgage rate is 4%, you would generally need to qualify at 6%.

The stress test is designed to help ensure that borrowers can manage their mortgage payments if interest rates increase. Applicable exceptions and lender requirements may vary.

Step 5: Get a Mortgage Pre-approval

Once you have saved your down payment, prepared your documentation, and found a mortgage broker, the next step is to obtain pre-approval for a mortgage.

Mortgage pre-approval does not usually cost anything and does not require you to commit to a specific lender. However, it does provide you with valuable information that can guide your home search, such as:

• How much you can afford to spend on a house
• How much your maximum monthly mortgage payment could be
• What mortgage interest rate may be available to you

Obtaining a mortgage pre-approval is a useful way to acquire these vital details, which can assist you in determining your maximum purchase price.

Depending on your lender, you may also be able to secure a mortgage rate for a specified period while searching for a home.

A rate hold can protect you against interest rate increases during the specified period. However, if interest rates decrease, whether you receive the lower rate depends on your lender’s policy and the terms of your pre-approval.

Remember that a mortgage pre-approval is not a final mortgage approval. Your lender will still need to verify your financial information, assess the property, and complete the required underwriting before approving your mortgage.

Getting a pre-approval can be a little daunting if you’ve never done it before, so check out this list of dos and don’ts for pre-approvals before you begin.

Step 6: Find a Home

Finally, the fun part – house hunting! With your mortgage pre-approval in hand, your maximum purchase price in mind, and a substantial down payment, you’re ready to contact a real estate agent and begin your house hunt.

Here are our top tips:

• Find a real estate agent who specializes in the type of house or neighbourhood you prefer. Family referrals are a great place to start.
• Avoid representing yourself if you’re a first-time home buyer. It’s often better to rely on the expertise of an experienced agent.
• Make a list of must-have and nice-to-have features for your future house. It’s important to know where you can be flexible.
• Research the market in your ideal neighbourhood to make sure home prices and your maximum purchase price are in sync.
• Be prepared to move quickly in a competitive market.

You can use real estate websites such as Zoocasa, REALTOR.ca, and other property listing platforms to research available homes without having to leave the house.

When viewing properties, don’t forget to check more than just the appearance of the home. Consider the following:

• The condition of the roof, windows and foundation
• Plumbing, electrical and heating systems
• Property taxes and utility costs
• Parking availability and storage space
• Neighbourhood amenities and public transportation
• Potential renovation and maintenance expenses
• Condominium fees, if applicable

A home may look attractive during a viewing, but understanding its condition and ongoing expenses can help you avoid unexpected costs after purchasing it.

Step 7: Make an Offer and Seal the Deal

Once you have found the house you want, the process will move quickly, but don’t worry. Firstly, you’ll need to submit an offer to purchase. If the housing market is competitive, you may not be the only buyer submitting an offer.

If your offer is accepted, you’ll then pay a deposit to the seller, which will be applied to the purchase price of the home. You’ll also need to finalize your mortgage financing through your mortgage broker and arrange for a home inspection.

Your offer may include conditions such as:

• Financing approval
• A satisfactory home inspection
• Review of condominium documents, if purchasing a condo
• Other conditions relevant to the property and transaction

The offer may be amended based on the findings of the home inspection. Eventually, you’ll secure your financing and, with the help of a real estate lawyer, pay your down payment and transfer the title of the home into your name.

The entire process typically takes 30–60 days, depending on the terms of the offer to purchase, mortgage approval, legal requirements and the agreed closing date. New construction purchases may have significantly different timelines.

Finally, you’ll receive the keys from your real estate agent, and you’ll officially become the owner of your new home.

Important Mortgage Rule Changes in Canada for 2027

Canada continues to introduce changes to mortgage insurance and financing rules to improve access to housing and support residential construction.

Here are some important mortgage rules and changes to understand when buying a home in 2027.

1. Higher Insured Mortgage Price Limit: $1.5 Million

One of the major changes to Canada’s mortgage rules was the increase in the maximum purchase price eligible for an insured mortgage from $1 million to $1.5 million.

The change took effect on December 15, 2024.

Previously, buyers purchasing homes priced at $1 million or more generally needed a minimum 20% down payment to obtain a mortgage without relying on an alternative financing arrangement.

Under the expanded rules, eligible buyers purchasing homes below $1.5 million may qualify for an insured mortgage with a down payment of less than 20%, provided they meet the applicable mortgage insurance requirements.

This change is particularly relevant in higher-priced housing markets such as Toronto and Vancouver.

2. 30-Year Mortgage Amortization for Eligible Buyers

First-time home buyers and purchasers of newly built homes can qualify for insured mortgages with amortization periods of up to 30 years.

The expanded eligibility took effect on December 15, 2024.

A longer amortization period allows eligible buyers to spread their mortgage payments over more years, potentially reducing their monthly payments.

However, a longer amortization period generally means paying more interest over the life of the mortgage.

Buyers should compare the total interest costs of a 25-year mortgage against a 30-year mortgage before deciding which option is more suitable.

3. New Mortgage Insurance Options Starting February 1, 2027

Starting February 1, 2027, new mortgage insurance options are scheduled to become available for certain multi-unit residential properties.

The changes are designed to support Canada’s missing-middle housing market, including smaller multi-unit residential developments.

The announced changes include:

Five-to-50-Unit Residential Properties

Eligible properties containing between five and 50 self-contained residential units may qualify for mortgage loan insurance under the new framework.

The announced financing parameters include:

• Up to 90% loan-to-value financing for eligible new construction.
• Up to 85% loan-to-value financing for other eligible transactions.
• Maximum amortization of 50 years for new construction.
• Maximum amortization of 40 years for other eligible transactions.
• Financing options for construction, purchase, refinancing and mortgage renewal.
• No owner-occupancy requirement.

New Three- and Four-Unit Residential Properties

The new rules also provide additional financing flexibility for eligible newly constructed three- and four-unit residential properties.

The announced parameters include:

• Up to 90% loan-to-value financing.
• Maximum amortization of 30 years.
• No owner-occupancy requirement.
• No maximum property value limit under the announced program parameters.
• Maximum GDS ratio of 39%.
• Maximum TDS ratio of 44%.
• Minimum credit score of 600 for at least one borrower or guarantor.

These new options are primarily intended to support housing construction and small-scale residential development. They are not general mortgage benefits for every buyer purchasing an ordinary single-family home.

Eligible borrowers should confirm the program requirements with participating lenders and mortgage insurers before making financing decisions.

Additional Considerations

Beyond the essential steps, there are additional considerations to keep in mind as you navigate the home-buying process:

Moving and Settling In

Moving into your new home is an exciting milestone, but it requires careful planning and organization. Here are some tips to ensure a smooth transition:

• Plan Ahead: Create a moving checklist and timeline to stay organized. Arrange for moving services, pack your belongings, and update your address with important institutions.
• Utilities and Services: Set up utilities (e.g., electricity, water, internet) and schedule service installations in advance to avoid disruptions.
• Home Insurance: Obtain home insurance to protect your investment and belongings. Compare different policies to find the best coverage for your needs.
• Furnishing and Decorating: Take your time to furnish and decorate your new home. Prioritize essential items and gradually add personal touches to create a comfortable and inviting space.

Maintaining Your Home

Homeownership comes with responsibilities for maintaining and preserving your property. Regular maintenance can prevent costly repairs and ensure your home remains in good condition:

• Seasonal Maintenance: Perform seasonal maintenance tasks such as cleaning gutters, checking the roof, servicing heating and cooling systems, and winterizing your home.
• Repairs and Upgrades: Address repairs promptly to prevent minor issues from becoming major problems. Consider upgrades that enhance the value and functionality of your home.
• Budget for Maintenance: Set aside funds for ongoing maintenance and unexpected repairs. A general rule of thumb is to budget 1%–3% of your home’s value annually for maintenance expenses, depending on the age and condition of the property.

Financial Planning

Owning a home impacts your financial situation, so it’s important to plan and manage your finances effectively:

• Mortgage Payments: Ensure you make timely mortgage payments to avoid penalties and maintain a good credit score.
• Property Taxes: Understand your property tax obligations and budget for these expenses. Property taxes vary by municipality and can impact your overall housing costs.
• Home Equity: Over time, your home may appreciate in value, building equity. Consider how you can leverage home equity for future financial goals, such as renovations or investments. Remember that property values can also decline.
• Emergency Fund: Maintain an emergency fund to cover unexpected expenses, such as major repairs or job loss. Having a financial cushion provides peace of mind and financial stability.

FAQs About Buying a House in Canada

We heard you, which is why AllReview.ca has compiled and answered some of the most frequently asked questions about buying a house in Canada so you don’t have to do all the research yourself.

Read More Helpful Resources on All Review

Looking for more Canadian resources? Browse our collection of in-depth guides covering government benefits, housing, education, and much more—all designed to help you navigate life in Canada with confidence.

Federal & Provincial Benefits

• Canada Child Benefit (CCB)
• Employment Insurance (EI)
• Disability Tax Credit (DTC)
• Canada Pension Plan (CPP)
• Old Age Security (OAS)
• Ontario Trillium Benefit (OTB)
• Canada Workers Benefit CWB and ACWB
• Canada Training Credit

Government, Education & Living in Canada

• CRA My Account Registration Guide
• Social Insurance Number (SIN) Application Guide
• My Service Canada Account (MSCA) Guide
• Minimum Wage by Province
• Best Universities in Canada
• Best Cities to Live in Canada
• How to Donate to Food Banks Canada
• How to Get Help from a Food Bank in Canada

Conclusion

Buying a home in Canada is a significant and rewarding milestone. By following these seven steps and staying organized throughout the process, you can navigate the complexities of the real estate market with confidence.

Remember to take advantage of available programs and incentives, including the First Home Savings Account, Home Buyers’ Plan, applicable land transfer tax rebates and GST/HST rebates. Don’t hesitate to seek professional advice when needed.

By planning ahead, conducting thorough research, and being prepared for each step, you’ll be well-equipped to make informed decisions and achieve your goal of homeownership.

The journey to buying your first home may have its challenges, but the sense of accomplishment and stability that comes with owning a home makes it all worthwhile.

Good luck, and may your new home bring you happiness and prosperity for years to come!