First-Time Home Buyer's Checklist
Everything You Need to Know Before Purchasing Your First Property in Canada
Buying your first home is an exciting milestone, but the process can feel complex and overwhelming. Being well-prepared is the key to a smooth journey. This comprehensive checklist provides a step-by-step guide, with special emphasis on the valuable resources and incentives available from the Government of Canada to help first-time home buyers.
Financial Preparation (The Foundation)
Your financial health is the bedrock of your home-buying power. Start here, well before you begin house hunting.
✓1. Assess Your Financial Readiness
Check Your Credit Score
A high credit score (ideally 680+) will help you qualify for better mortgage rates. Review your credit report for errors and work to reduce outstanding debt.
Calculate Affordability
Use online calculators (like those offered by CMHC) to estimate how much mortgage you can afford.
- Gross Debt Service (GDS) Ratio: Your monthly housing costs (mortgage principal/interest, property taxes, heating) should generally not exceed 39% of your gross monthly income.
- Total Debt Service (TDS) Ratio: Your entire monthly debt load (GDS + all other debts like loans and credit card payments) should generally not exceed 44% of your gross monthly income.
Review Your Down Payment Requirement
- The minimum down payment in Canada is 5% of the first $500,000, and 10% on the portion between $500,000 and $1,000,000.
- If your down payment is less than 20%, you must purchase mortgage loan insurance (often called CMHC insurance).
- For homes priced at $1 million or more, the minimum down payment is 20%.
✓2. Maximize Government Savings Programs
The Government of Canada offers powerful tax-advantaged tools to help you save for your down payment:
| Program | Feature | Maximum Contribution/Withdrawal | Government Source |
|---|---|---|---|
| First Home Savings Account (FHSA) | Contributions are tax-deductible, and qualifying withdrawals for a first home are tax-free. | Up to $8,000 annually, up to a $40,000 lifetime limit. | Canada Revenue Agency (CRA) - FHSA |
| Home Buyers' Plan (HBP) | Allows you to withdraw funds from your Registered Retirement Savings Plan (RRSP) tax-free to buy or build a home. Repayment is over 15 years. | Up to $60,000 per person (must be repaid). | Canada Revenue Agency (CRA) - HBP |
✓3. Budget for Closing Costs
These are one-time costs due on your closing day, typically ranging from 1.5% to 4% of the home's purchase price. Budget for them in addition to your down payment.
- Legal fees and disbursements
- Land Transfer Taxes (Provincial and/or Municipal) - See incentives below for potential rebates
- Home Inspection fee
- Appraisal fee (may be required by your lender)
- Adjustments (e.g., prepaid property taxes or utilities)
Securing Your Financing
With your finances in order, the next step is to lock in your lending terms.
✓4. Get a Mortgage Pre-Approval
A pre-approval confirms the maximum amount a lender is willing to lend you and the estimated interest rate. This is essential for setting your budget and showing sellers you are a serious buyer.
Gather Required Documents
You will need documents such as proof of income (T4s, T1 Generals, Notices of Assessment for the last two years), proof of down payment funds, and job letters.
Understand the Mortgage Stress Test
All federally regulated lenders must ensure you can afford payments at a higher qualifying interest rate (the stress test rate). This is mandatory to ensure you can handle future rate hikes.
✓5. Consult Professionals
Mortgage Broker/Lender
Discuss fixed vs. variable rates and the length of your amortization period (up to 30 years is now available for first-time buyers with insured mortgages).
Real Estate Agent (REALTOR®)
Find an agent with experience in your target neighbourhoods. They will help you find listings, negotiate the purchase price, and navigate paperwork.
Finding and Buying Your Home
✓6. Define Your Needs and Search
- Create a Must-Have/Nice-to-Have List: Be realistic about location, size, property type (condo, house, etc.), and features.
- Research Neighbourhoods: Look at proximity to work, schools, transit, and amenities.
- Get a Home Inspection: An inspection is highly recommended to uncover any major issues before you commit to the purchase.
✓7. Review Your Purchase Agreement
Retain a Real Estate Lawyer
Your lawyer is critical. They will review the Agreement of Purchase and Sale, conduct a title search, ensure all conditions are met, and handle the final transfer of funds and title registration.
Ensure Conditions are Met
Common conditions include a satisfactory home inspection and final mortgage approval.
Post-Purchase Incentives
Once you have purchased a qualifying home, there are more benefits to claim at tax time.
✓8. Claim Tax Credits and Rebates
| Program | Benefit | How it Helps | Government Source |
|---|---|---|---|
| Home Buyers' Amount (HBA) | A non-refundable federal tax credit of up to $1,500. | Reduces your federal tax payable in the year of purchase. | Canada Revenue Agency (CRA) - Home Buyers' Amount |
| GST/HST New Housing Rebate | Recovers part of the GST or the federal part of the HST paid on a new or substantially renovated house. | Lowers the net cost of a newly built home. | Canada Revenue Agency (CRA) - GST/HST New Housing Rebate |
| Provincial/Territorial/Municipal Rebates | Varies by region, often providing a rebate on Land Transfer Taxes. | Significantly reduces closing costs (e.g., Ontario offers a provincial refund up to $4,000, plus an additional municipal refund in Toronto). | Contact your provincial/municipal government for details. |
| CMHC Eco Plus | Potential rebate of up to 25% on your mortgage loan insurance premium for purchasing an energy-efficient home. | Saves you money on your mortgage loan insurance premium. | Canada Mortgage and Housing Corporation (CMHC) - Eco Plus |
Important Note
Remember, while this checklist simplifies the process, your best move is to consult with licensed financial and legal professionals who can provide advice tailored to your personal situation. Not all programs and incentives may apply to everyone, and eligibility criteria can change. Stay informed and make the most of the resources available to you as a first-time home buyer in Canada.
Ready to Find Your First Home?
Use HouseTrade to discover properties that match your budget and preferences
Start Your Home Search