First-Time Home Buyer's Guide: Buying Your First Home in Ontario
Buying your first home is a big milestone. It's exciting to start looking at properties, imagining where you'll live and planning your future. But if you're like many first-time buyers, you probably have a lot of questions.
How much can I afford? How much do I need for a down payment? What does getting a mortgage pre-approved actually involve? What other costs should I be preparing for?
The good news is that you don't need to figure everything out on your own.
I've put together this guide to help you understand the home-buying process in Ontario, what to expect when applying for a mortgage, and how to prepare financially before making an offer.
Whether you're looking to purchase your first home in Hamilton, Grimsby, Burlington, Stoney Creek, St. Catharines or somewhere else in the Niagara Region, having a plan in place can make the experience a whole lot easier.
1. Start With a Realistic Home-Buying Budget
Before you start scrolling through real estate listings, it's important to understand what you can comfortably afford.
A lender will look at several factors when determining how much mortgage financing you may qualify for, including:
Household income: Your employment income and any other qualifying sources of income.
Existing debts: Car loans, credit cards, lines of credit, student loans and other financial obligations.
Credit history: Your credit score and repayment history.
Down payment: How much you have available and where the funds are coming from.
Property expenses: Estimated property taxes, heating costs and condominium fees, if applicable.
One thing I always encourage buyers to consider is the difference between what a lender may approve and what actually makes sense for your household.
Just because you qualify for a certain mortgage amount doesn't necessarily mean you should borrow the maximum.
You still need room in your monthly budget for groceries, utilities, insurance, transportation, savings, family expenses and enjoying life.
My approach is to help you find a mortgage that fits your financial situation and long-term goals, not simply focus on the largest amount a lender is willing to offer.
2. Get a Mortgage Pre-Approval Before House Hunting
A mortgage pre-approval is one of the most important first steps when buying a home.
It gives you a better understanding of your potential borrowing capacity, helps establish a realistic shopping budget and may provide an interest rate hold for a specified period.
Here's what typically happens during the pre-approval process:
Complete a mortgage application: We'll review your income, employment, debts, assets and financial situation.
Review your credit history: Your credit profile helps determine which mortgage options and lenders may be suitable.
Review your down payment: We'll look at how much you have available and verify the source of your funds.
Explore mortgage options: We'll compare suitable lenders, mortgage products, rates and features.
Submit for pre-approval: Once we've reviewed everything, we'll determine the appropriate lender and submit your application where applicable.
Is a mortgage pre-approval a guaranteed approval?
No. A pre-approval is an important starting point, but it is not a guarantee that your mortgage will be approved.
Once you find a property, the lender will need to review the property details, purchase agreement, supporting documentation and any other outstanding conditions.
This is why I recommend getting your mortgage reviewed properly before you start making offers.
Not sure where to start? That's perfectly fine. We can walk through the process together.
3. How Much Down Payment Do You Need in Ontario?
One of the most common questions from first-time homebuyers is how much money they actually need to purchase a home.
In Canada, the minimum down payment depends on the purchase price and applicable mortgage insurance rules.
Generally, the minimum down payment requirements are:
Up to $500,000: 5% of the purchase price.
Between $500,000 and $1.5 million: 5% on the first $500,000 and 10% on the portion above $500,000.
$1.5 million or more: Generally, a minimum of 20%.
If your down payment is less than 20%, mortgage default insurance will generally be required, subject to lender and insurer eligibility requirements.
This insurance protects the lender, not the homeowner, and its premium is generally added to the mortgage balance.
It's important to remember that your down payment isn't the only money you'll need. You'll also need to budget for closing costs and other expenses associated with purchasing a home.
Where can your down payment come from?
Your down payment may come from several sources, depending on lender requirements:
Personal savings.
First Home Savings Account (FHSA).
RRSP withdrawals through the Home Buyers' Plan.
A qualifying gift from an immediate family member.
Proceeds from the sale of another property.
Other acceptable and documented sources of funds.
Lenders will generally want to understand where your down payment came from and see supporting documentation.
For personal savings, this often means providing bank statements and transaction history covering approximately 90 days, although the exact requirements depend on the lender and source of funds.
If you're receiving a gifted down payment, the lender will typically require a signed gift letter confirming that the money is a genuine gift and does not need to be repaid.
My recommendation is to start organizing your down payment documents early. It can save a lot of back-and-forth once you're ready to make an offer.
4. Government Programs and Incentives for First-Time Homebuyers
There are several government programs that may help eligible Canadians save for or purchase their first home.
Here are two worth understanding before you buy.
First Home Savings Account (FHSA)
The First Home Savings Account is designed to help eligible Canadians save for their first home.
One of the biggest advantages is that qualifying contributions are generally tax-deductible, and qualifying withdrawals used to purchase a home are tax-free.
Some key details:
Annual contribution limit: $8,000.
Lifetime contribution limit: $40,000.
Unused contribution room can generally be carried forward, subject to program rules.
If you're planning to purchase a home in the future, opening an FHSA and contributing regularly may be worth considering.
RRSP 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.
Under current federal rules, eligible withdrawals can be up to $60,000 per individual.
If you're purchasing with a qualifying partner, you may each be able to use the program, subject to eligibility requirements.
The funds must be repaid to your RRSP over the applicable repayment period. Withdrawals are subject to specific program conditions.
Ontario Land Transfer Tax Refund for First-Time Homebuyers
When you purchase a property in Ontario, you'll generally have to pay provincial land transfer tax.
However, eligible first-time homebuyers may qualify for a refund of up to $4,000.
There are specific eligibility requirements, including age, previous home ownership and occupancy requirements.
It's important to understand that first-time homebuyer eligibility can differ between government programs. Qualifying for one program does not automatically mean you qualify for another.
Your real estate lawyer can help confirm eligibility and coordinate the land transfer tax refund as part of your closing.
Helpful government resources:
5. What Documents Do You Need to Get a Mortgage?
One of the best ways to prepare for buying your first home is to start gathering your mortgage documents early.
Every lender is a little different, and the documents required will depend on your employment, income, down payment and overall financial situation.
Here are some of the documents you may be asked to provide.
Employment and Income
Recent pay stubs.
Current letter of employment confirming your position, salary and employment status.
T4 slips.
Notices of Assessment, particularly for self-employed applicants or certain income types.
Additional income documentation, if applicable.
Down Payment and Savings
Bank statements showing your available savings.
Investment statements, if applicable.
FHSA or RRSP statements.
Transaction history showing where your funds originated.
Gift letter and supporting documents, if receiving a gifted down payment.
Other Financial Information
Government-issued identification.
Details of existing loans and credit obligations.
Information about other properties or assets you own.
Additional documents requested by the lender.
Getting these documents together early can help avoid delays when you're ready to move forward.
6. Don't Forget About Closing Costs
Your down payment is only one part of the money you'll need to purchase a home.
There are several additional expenses that come with buying a property, and it's important to budget for them before making an offer.
As a general guideline, I recommend planning for approximately 1.5% to 4% of the purchase price for closing costs, although your actual costs will depend on the property and your circumstances.
Here are some common expenses to consider.
Legal Fees
You'll need a real estate lawyer to handle the legal side of your purchase, review documents, register the property and complete the closing.
Legal fees and disbursements will vary depending on the lawyer and complexity of the transaction.
Land Transfer Tax
Ontario charges land transfer tax when you purchase a property.
The amount depends on the purchase price, and eligible first-time buyers may qualify for a refund.
Home Inspection
A professional home inspection can help identify potential issues with the property before you complete your purchase.
Your realtor can help you arrange an inspection and understand what to look for.
Appraisal Fee
Depending on the lender and property, an appraisal may be required to confirm the property's market value.
If required, the cost is generally paid by the buyer, although some lenders may cover it.
Title Insurance
Title insurance provides protection against certain title-related risks and issues associated with property ownership.
Your lawyer can explain the coverage and cost.
Property Tax and Utility Adjustments
If the seller has already paid certain property expenses beyond the closing date, you may need to reimburse them for your portion.
Moving Expenses and Utility Deposits
Don't forget to account for moving costs, utility setup fees and potential deposits required by service providers.
The goal is to make sure you're financially prepared not only to purchase your home, but also to comfortably move into it.
7. What Happens After You Find a Home?
Once you've found a property and your offer has been accepted, the mortgage process moves into the final approval stage.
Here's what typically happens:
Submit the purchase agreement: Your mortgage agent will need a copy of the signed Agreement of Purchase and Sale.
Review the property: The lender will assess the property details and determine whether an appraisal is required.
Submit supporting documents: Any outstanding income, employment, down payment and other documentation will be provided.
Receive the mortgage commitment: The lender will issue an approval outlining the mortgage terms and any conditions that need to be satisfied.
Satisfy lender conditions: All outstanding requirements must be completed before the mortgage can be finalized.
Work with your lawyer: Your lawyer will coordinate the legal documents, mortgage registration and closing arrangements.
Get your keys: Once everything is finalized and the transaction closes, you're officially a homeowner!
Throughout this process, I'll work with you, the lender and your lawyer to help keep things moving and address any mortgage-related questions along the way.
8. Work With a Mortgage Agent Who Understands Your Goals
Buying your first home involves a lot of decisions, and your mortgage is one of the biggest financial commitments you'll make.
My role is to help you understand your options, explain the details and find a mortgage solution that makes sense for your situation.
As a Level 2 Mortgage Agent with Mission35 Mortgages, I work with a network of mortgage lenders, including banks, credit unions, monoline lenders and alternative lending solutions.
That means we can explore different mortgage options rather than limiting the conversation to a single financial institution.
Whether you're a salaried employee, self-employed, purchasing with a partner, receiving a gifted down payment or navigating a more complicated financial situation, I'll take the time to understand your circumstances.
I believe the right mortgage isn't always about finding the lowest advertised rate. It's about finding the right combination of rate, mortgage features, flexibility and affordability for your needs.
I work with homebuyers throughout Hamilton, Grimsby, Stoney Creek, Burlington, Oakville, St. Catharines and the surrounding Niagara Region and Golden Horseshoe.
Ready to Take the First Step?
You don't need to have everything figured out before reaching out.
Whether you're just starting to explore homeownership or you're already looking at properties, let's have a conversation about your plans.
We can review your financial situation, discuss your down payment, explore mortgage options and put together a plan to help you move forward with confidence.
Let's get you one step closer to your first home.
Danny Benjamin
Mortgage Agent Level 2 | Mission35 Mortgages
Independently Owned and Operated. Lic: 12844
Phone: 289-455-8801
Email: dannyb@mi35.ca
Website: www.DannyBenjamin.ca
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Mortgage approvals, rates, programs and eligibility are subject to lender requirements and applicable government rules. The information on this page is for general educational purposes only and is not financial, legal or tax advice. Program limits and eligibility requirements may change. Please consult the appropriate professionals for advice about your circumstances.
