Guide to First-Time Home Buyers in Canada (2026)

Introduction

Buying your first home is exciting, but it can also be overwhelming. There are down payments to save, mortgage approval to get, inspections to arrange, and closing costs to understand. This guide walks you through the entire process so you can buy with confidence.

Step 1: Check Your Credit Score

Lenders use your credit score to determine if you qualify and what interest rate you'll get. A higher score means better rates. Check your score through Equifax or TransUnion before applying.

Step 2: Save Your Down Payment

In Canada, you can put down as little as 5% on a home under $500,000. However, a larger down payment means:

• Lower monthly mortgage payments
• Less interest paid over the loan
• No CMHC mortgage insurance (required if down payment is less than 20%)
• Better negotiating power with sellers

Typical down payments: 5% (minimum), 10%, 15%, or 20% (no insurance needed).

Step 3: Understand CMHC Mortgage Insurance

If you put down less than 20%, you must pay mortgage default insurance (CMHC, Sagen, or Canada Guaranty). This insurance protects the lender if you can't pay. The cost ranges from 1.6% to 4.0% of your mortgage amount and is added to your loan.

Step 4: Get Pre-Approved

Pre-approval shows sellers you're a serious buyer and tells you exactly how much you can borrow. It's free and typically lasts 90 days. Get pre-approved from multiple lenders to compare rates.

Step 5: Find a Home and Make an Offer

Work with a real estate agent to find homes in your budget. When you find one you like, make an offer. Negotiations happen here—don't rush.

Step 6: Home Inspection and Appraisal

You'll typically pay for:

• Home Inspection ($300-800): Professional checks for structural issues, electrical problems, plumbing, etc.
• Appraisal ($250-500): Lender orders this to confirm the home's value matches the purchase price

Hidden Costs to Expect

• Home inspection: $300-$800
• Appraisal: $250-$500
• Legal fees: $800-$1,500
• Property taxes (prorated): Varies
• Home insurance: $800-$1,200/year
• Closing costs: 1.5-4% of purchase price

Fixed vs. Variable Mortgage Rates

Fixed Rate: Rate stays the same for the entire term (5-10 years). Payments are consistent and predictable.

Variable Rate: Rate fluctuates with market conditions. Starts lower but can increase, affecting your payment.

First-time buyers typically choose fixed rates for predictability.

Final Steps to Closing

1. Final mortgage approval from your lender
2. Title search to confirm property ownership
3. Final walk-through of the property
4. Sign closing documents
5. Transfer funds for down payment and closing costs
6. Receive keys and become a homeowner!

How Much Can You Afford?

Lenders use two ratios to approve mortgages:

• GDS (Gross Debt Service): Max 39% of gross monthly income can go to housing costs
• TDS (Total Debt Service): Max 44% of gross monthly income can go to all debts (including mortgage)

Example: If you earn $5,000/month gross, lenders will approve a mortgage payment of about $1,950 maximum.