Buying your first home is an exciting milestone, but it can also feel overwhelming if you’re not sure where to start. Between saving for a down payment, understanding government programs, and planning for extra costs, there’s a lot to think about before you make an offer.
For first-time home buyers in Canada, understanding these steps early can make the process far less stressful. To help you feel more confident and prepared, here are 7 key things every first-time home buyer in Canada should know before starting their home-buying journey.
#1 Who Qualifies as a First-Time Home Buyer in Canada
In Canada, a first-time home buyer isn’t just someone buying their very first home.
You may also be considered a first-time buyer if you haven’t owned or lived in a home in the last four years. This is often called the four-year rule and commonly applies to people who are divorced, separated, or returning to the housing market after a long time. If you qualify under this rule and plan to live in the home as your primary residence, you may still be eligible for first-time buyer incentives even if you’ve owned a home before.
This definition matters because it affects your access to programs like the First Home Savings Account (FHSA), the Home Buyers’ Plan (HBP), and certain land transfer tax rebates. If your situation is unclear, check the official government criteria or speak with a real estate professional before you start shopping.
#2 Government Programs and Tax Incentives That Can Help
Canada offers several programs designed to make buying your first home more affordable. Knowing which ones apply to you can make a big difference, especially when it comes to saving for a down payment and managing upfront costs.
Many first-time buyers take advantage of the following:
First Home Savings Account (FHSA): A special savings account created for first-time buyers. You can contribute up to $8,000 per year, to a lifetime maximum of $40,000. Contributions are tax-deductible, and withdrawals used toward a qualifying home purchase are tax-free.
Home Buyers’ Plan (HBP): This program allows you to withdraw up to $60,000 from your RRSP to put toward your down payment, without paying tax at the time of withdrawal (as long as it’s repaid according to the rules).
First-Time Home Buyers’ Tax Credit: A federal non-refundable tax credit worth up to $1,500 that helps offset some of the costs that come with buying a home, such as legal fees and other closing expenses.
#3 How Much You’ll Need For A Down Payment
Before you start house hunting, it’s important to understand how much you’ll need for a down payment. In Canada, the minimum down payment is calculated in tiers:
- 5% for the first $500,000 of a home’s price
- 10% for the portion between $500,000 and $1 million
- 20% for homes over $1 million
Your down payment affects more than just the upfront cost, it can also determine whether you need mortgage insurance and how much you can borrow. Planning your down payment early helps you set a realistic budget and avoid surprises when it’s time to make an offer.
#4 What Lenders Look For When You Apply for a Mortgage
When you apply for a mortgage, lenders look at a few key factors to make sure you can comfortably afford your home, both now and in the future. Understanding what lenders look for helps you prepare in advance and apply with confidence making the home-buying process feel far more manageable.
Income and Employment Stability
Lenders want to see consistent, reliable income. This helps them feel confident that you can manage your monthly mortgage payments over time.
Credit History and Credit Score
Your credit history shows how you’ve handled debt in the past. A stronger credit score and a record of on-time payments can improve your approval chances and help you qualify for better interest rates.
Existing Debts
Lenders review your current debts, such as car loans, student loans, and credit cards, to make sure your overall financial obligations are manageable.
Down Payment Amount
The size of your down payment matters. A larger down payment can strengthen your application and may reduce additional costs like mortgage insurance.
Savings and Financial Cushion
Having savings left over after your down payment shows lenders that you’re prepared for closing costs and unexpected expenses.
#5 Why Getting Pre-Approved Makes the Process Easier
Before you start browsing listings or going to open houses, it’s smart to get pre-approved for a mortgage. Pre-approval tells you how much you can borrow based on your income, credit history, and overall financial situation. This gives you a clear idea of your realistic price range and makes your offer stronger when you find the right home.
You can get pre-approved through a mortgage broker or lender, and it often locks in an interest rate for a set period, helping you plan with confidence. Starting your search with pre-approval makes the home-buying process smoother and less stressful.
#6 The Hidden Costs Many Buyers Don’t Plan For
Many first-time buyers focus only on the purchase price, but there are several additional costs to plan for:
- Closing Costs: Legal fees, title insurance, home inspections, and other adjustments can add up to 1.5–4% of the home’s price.
- Land Transfer Taxes: Some provinces, like Ontario, British Columbia, and Prince Edward Island, charge this tax. First-time buyers may qualify for rebates.
- Ongoing Expenses: Don’t forget property taxes, utilities, and maintenance, these are costs you’ll pay every month.
Planning for these extra expenses ahead of time helps prevent last-minute surprises and makes your move smoother. Being prepared ensures your budget covers more than just the sticker price.
#7 Choosing a Home With the Future in Mind
Buying your first home is exciting, but it’s also important to think beyond the immediate checklist. Consider your long-term needs, like space for a growing family, proximity to work or school, and potential resale value, so the home you choose today can still work for you in the years ahead. Working with an experienced realtor can help you weigh these factors, explore options that fit both your budget and lifestyle, and make informed decisions every step of the way.
Buying your first home is exciting, but it can also be tricky to navigate on your own. The Bernes Group can help. Our experienced team will guide you through every step, help you find the right home, and make sure your first home purchase is smooth and stress-free. Work with us, and turn your first home dream into a smart, confident reality.
TLDR FAQs:
Who qualifies as a first-time home buyer in Canada?
You’re considered a first-time home buyer if you’ve never owned a home, or if you haven’t owned or lived in a home you owned in the past four years. This definition can also apply to individuals who are divorced or separated and re-entering the housing market.
How much do first-time home buyers need for a down payment in Canada?
The minimum down payment is:
- 5% on the first $500,000 of the purchase price
- 10% on the portion between $500,000 and $1 million
- 20% for homes priced over $1 million
What programs are available for first-time home buyers in Canada?
First-time buyers may be eligible for programs such as the First Home Savings Account (FHSA), the Home Buyers’ Plan (HBP), and the First-Time Home Buyers’ Tax Credit, which are designed to help with down payments and upfront costs.
Should first-time buyers get pre-approved before buying a home?
Yes. Mortgage pre-approval helps first-time home buyers understand their budget, strengthens their offer, and makes the home-buying process more efficient and less stressful.