First-time home buyer guide in Canada

If you're buying your first home, the fastest way to reduce stress is to separate decisions into two buckets: (1) what you can afford on paper, and (2) what you want to afford in real life. This guide gives you a simple plan for both so you don't win a bidding war and lose your sleep.

Your practical goal: know your budget, know your cash to close, get a lender-backed pre-approval, and only then shop for homes that fit your payment comfort zone.

Different programs use slightly different definitions, but a common theme is the four-year rule: to be considered a first-time home buyer, you generally must not have lived in a home you (or your spouse/common-law partner) owned in the current year or the previous four calendar years.

Before you assume you qualify for a program, check the specific definition for FHSA, the RRSP Home Buyers' Plan (HBP), and the Home Buyers' Amount. If you're separated, recently moved, or your partner owns a home, definitions matter.

In Canada, minimum down payment requirements depend on the purchase price. The big threshold to understand is $1.5 million: at $1.5M and above, you need at least 20% down.

If you're below 20% down, you're typically in high-ratio territory and will usually require mortgage default insurance. That insurance protects the lender, not you, and the premium can often be added to your mortgage amount (meaning you pay interest on it).

Mortgage default insurance exists because a smaller down payment is higher risk for lenders. If you put less than 20% down, lenders typically require default insurance (sometimes called mortgage loan insurance).

What it changes: it can allow you to buy sooner with a smaller down payment and may make an approval possible at certain lenders. What it doesn't change: you still need to qualify (income, credit, and the stress test), and you still need cash for closing costs.

Pragmatic move: if you're buying with less than 20% down, run scenarios with (a) a slightly higher down payment, and (b) a slightly lower purchase price. Sometimes one small change lowers your payment and your risk more than you'd expect.

A down payment is not your full upfront cost. You'll also pay one-time closing costs and adjustments. A common planning range for closing costs is 1.5% to 4% of the home's purchase price, but your exact number depends on your province, your property type, and your closing details.

Your deposit (paid with the offer) is usually part of your down payment, not an extra fee. But it does affect your cash flow timing, so plan for it.

If you're eligible, first-time buyer programs can reduce taxes or help you build (or access) a down payment. The key is to understand which programs reduce cash up front versus which reduce taxes later.

Common examples:

Important: the federal First-Time Home Buyer Incentive is no longer accepting applications.

Federal rule changes expanded insured mortgage parameters. Practically, this can affect (1) which homes can be purchased with less than 20% down, and (2) whether a 30-year insured amortization may be available for certain buyers and properties.

Pragmatic lens: a longer amortization can lower your monthly payment, but it can increase total interest paid over time. Treat it as a cash-flow tool, not free money.

A strong pre-approval is more than a rate hold; it's a risk check. When your income documents, down payment trail, and debts are clear, your mortgage approval is faster and your offer is safer.

Before you shop seriously, build a simple folder with: income proof, current debts, recent bank statements for down payment, and any gift documentation. If you're self-employed or new to Canada, start earlier because documentation can take longer.

Most borrowers must qualify at a higher rate than the one they actually pay, often called the mortgage stress test. For uninsured mortgages at federally regulated lenders, the minimum qualifying rate is generally the greater of your contract rate plus 2% or a benchmark rate.

Pragmatic move: qualify yourself twice, once at today's expected rate, and once at a higher life-happens rate, so a renewal or variable-rate swing doesn't blow up your budget.

In a competitive market, speed matters, but so does protection. Your offer conditions (financing, inspection, review of condo docs, etc.) are risk controls. Removing them too early can turn a bad surprise into a very expensive one.

A clean pre-approval file, a realistic closing timeline, and a clear deposit plan are often more valuable than trying to guess the perfect negotiation tactic.

For first-time buyers, the best mortgage is usually the one that matches your risk tolerance and life timeline, not just the lowest headline rate.

Compare: fixed vs variable, term length, prepayment flexibility, portability, and penalties. A slightly higher rate with better flexibility can be cheaper if your life changes (job move, family changes, refinance plan).

In the final stretch, your job is to remove uncertainty: confirm your lender conditions are satisfied, your insurance is in place, and your lawyer or notary has everything needed to close on time.

Do a final cash check: down payment remainder plus closing costs plus adjustments. If your funds include FHSA or RRSP withdrawals, confirm timing and documentation.