First-Time Home Buyers Guide Canada

Welcome!

Leading the way to home buying success.

Whether you're on Vancouver Island, the Lower Mainland, the Okanagan, or any other part of BC, this guide is for you. And even if you're not in BC - this website is for you too!)

dreaming of buying a home?

Owning a home is an exciting milestone, and there’s a lot to think about. This guide is here to walk you through every step of your Home Buying Journey, offering valuable insights, helpful tips, and handy worksheets.
There's a lot to learn, especially when it comes to saving more. Is your bank going to help you with all that? Short answer: No. But we can.
We’ve covered nearly everything to ensure a smooth process (though the kitchen sink is still your responsibility!). You’ll need expert support along the way, and we’re here to provide that too.

Inside this website you will find pages of documents that you're going to be asked for, terms you need to understand, professionals that can help you (in BC only currently) with your real estate, legal and inspection needs, and way way more.

How much can you afford?

There are many factors that go into determining how much home you can afford.

 

To qualify you for a mortgage, a lender considers details such as your income, debt ratios, and credit standing. Different types of lenders (prime and alternative) may use differing qualifiers for your situation.

 

What you can afford ultimately comes down to: 

  • Your financial situation
  •  The monthly mortgage payment amount you can (comfortably) handle
  • The federal mortgage stress test, which can impact your home shopping amount

Use our Mortgage Payment Calculator to see your initial numbers — it shows you how the home price, size of down payment, and mortgage rate can impact your payment amount.

 

Then, consider your monthly expenses and how home costs might fit in. Buying a home shouldn’t leave you ‘house poor’ — unable to afford a vacation or put money aside.


Let’s continue with a look into how your financial standing factors into your first-home dreams.

Your Income

 

What’s your mortgage potential? Lenders first look at your annual income amount, source, and history to assess your ability to handle mortgage payments. Your income can include overtime, commissions, dividends, and any other sources.

 

Showing a steady history of employment in any occupation helps strengthen your mortgage application. Talk to an expert mortgage broker if you have questions about how a lender will perceive your details. 

 

Primary Income Types & Lender Requirements

Part-Time
- Minimum guaranteed hours
- 2-year history of employment (using 2-year average)
Full-Time
- Guaranteed annual salary or hours
- Bonus can be used only if guaranteed or 2- year history
Self-Employed or Contract
- 2-year history of this income source
- AFTER deductions income (Line 26000 on your T1's)

Additional Income Sources

May Be Accepted
- Government benefit
- Rental or investment income
- Vehicle allowance
- Pension or Disability incom
- Alimony or child support
Won't Be Accepted
- Cash (under the table) income
- Projected income (unless new dr/lawyer/dentist)
- Income not reported to Canada Revenue Agency (CRA)
- Employment Insurance (EI), unless for parental leave

Your Credit & Debit

Your credit score is a big factor in getting a mortgage and can affect how much it costs (hint: good credit usually means a better mortgage rate).

 

Lenders also take a look at your debt compared to your monthly income (called debt ratios) to see if you can handle mortgage payments. The better your ratios, the more you might be able to borrow—depending on other factors, of course.

DO

- Pay any late payments and resolve collections or judgements

- Ensure you’re making at least the minimum payment on all accounts — on time

- Try to stay within 60% of your limit on revolving accounts (such as credit cards)

DON'T

-Make late payments or miss payments

- Close accounts without checking with your mortgage broker as it may impact your credit score

- Wait too long to ask your broker for advice — the earlier the better to get in debt shape!

Do lenders use your FICO or Pinnacle Score?

 Mortgage lenders typically use your FICO score, not the Pinnacle Score (formerly known as Beacon), to assess your credit. Your FICO score may be lower than the Pinnacle score you see on Equifax or TransUnion, Canada’s credit bureaus—but don’t worry, this usually won’t affect your mortgage approval.

 

What’s considered a ‘good’ credit score? Scores range from 300 to 900. A score between 660 and 900 is considered good, very good, or excellent.

Your Down Payment

What’s a down payment? It’s the upfront money you pay towards your home to secure some equity. The size of your down payment can impact the home price you can afford, your mortgage payment, and whether you’ll need mortgage default insurance.
 

Where can it come from? Saving for your down payment is a key step. Lenders have specific rules about where the funds come from and usually require a 90-day history of the money being in your account. To make things easier, keep the funds in one savings account without transfers during this time. Plus, your realtor will want to know your down payment is ready before you start house hunting.

Why do you pay an insurance premium with less down payment?

When your down payment is less than 20% of the home’s purchase price, you're required to have default insurance from one of the three insurers - Sagen, CMHC (Canada Mortgage and Housing Corporation), and Canada Guaranty. This insurance is a federal requirement designed to protect the lender in case you’re unable to make your mortgage payments.

The premium is typically added to your mortgage, from 2.8% - 4.5% of the total loan amount. While this might seem like an extra cost, there are some benefits. For starters, it allows you to buy a home with a smaller down payment, which can make homeownership more accessible. Plus, it opens the door to mortgage options that might not otherwise be available. It’s a small trade-off for getting into your home sooner.

Lenders Will Accept

- Savings, chequing, trading or investment accounts
- Gift from close family member
- Sale of previous home or assets
- Equity borrowed from other property

Lenders Won't Accept

- Gift from non-relatives
- Funds from a sanctioned country
- Cryptocurrencies, such as Bitcoin
- Cash or funds that cannot be traced

Insured Mortgage

- Less than 20% down

- Up to 1.5M purchase price (as of Dec 15, 2024)
- Lowest advertised rate

- Insurance premium is added to the mortgage

Conventional/Insurable

- 20% down or more

- No insurance premium

- Interest rates offered will be higher than insured
- 35% down or more and insured rates may be available

Closing Costs? Extras to Prepare for

In addition to your down payment, it’s important to budget for mortgage closing costs. These costs typically range from 1.5% to 4.0% of your home’s purchase price, depending on various factors like the province you're buying in and the specific services required.

 

Closing costs include things like legal fees, title insurance, land transfer taxes, home inspection fees, and any other expenses related to finalizing your home purchase. Unlike your down payment, these costs cannot be added to your mortgage balance, so they’ll need to be paid out of pocket at closing.

 

If needed, you can borrow the funds for closing costs from a different source, such as a line of credit or a gift from a family member. However, keep in mind that any additional borrowing may affect your debt ratios, which lenders will review during the mortgage approval process. So, it’s essential to factor these costs into your overall budget and plan ahead to avoid any surprises.

Ways to Save:

- Family and friends can help you move

- Go to the mall, liquor store, grocery store, etc for free boxes
- Checkout craigslist and marketplace for any appliances you need to replace or even the thrift store for furniture

- Get your best mortgage options and rate (from us, of course!)

Fixed or Variable Rate

What’s the difference between a variable and fixed mortgage rate? Your choice depends on several factors, including your financial situation and your comfort level with the potential 'risk' of fluctuating rates and payments. A fixed mortgage rate stays the same for the term of your mortgage, giving you predictable payments and stability. On the other hand, a variable mortgage rate can change over time, depending on market conditions, meaning your payments could go up or down.

 

The decision is really about balancing security versus flexibility. The good news is that you can switch from a variable rate to a fixed rate at any time without penalty (though it will be subject to current market rates). This flexibility allows you to adjust your mortgage to suit your financial needs as they evolve. So, whether you prefer the consistency of a fixed rate or the potential savings of a variable rate, you have options to make it work for you.

Fixed
With a fixed mortgage rate, your rate and payment are locked in for the term, providing a safer option for consistent budgeting. However, if interest rates decrease, you won't be able to take advantage of the lower rates without paying penalties and fees to break your mortgage.

 

Pros

- Rate and payment are fixed for the term

- More term-length options available

- Can make budgeting easier (for peace of mind)

Cons

- Higher penalty to break or switch

- May cost you more than a variable rate over time

- If rates fall, your fixed rate doesn’t change

Variable/Adjustable

With a variable mortgage rate (also known as an adjustable rate), your interest rate (and mortgage payment) can fluctuate based on changes in the bank's prime rate. Typically offered as a 5-year term, this rate is often lower than a 5-year fixed rate due to the potential for changes.
 

Pros:

- Usually a lower rate compared to a fixed-rate mortgage

- Over time, you may save more than with a fixed rate

- Lower penalty if you need to break or switch the mortgage

Cons:

- If rates go up, your payments will increase as well

- Can make it harder to budget due to payment uncertainty

- Rates may rise during your term, leading to higher costs

You mentioned variable is also know as adjustable... what does that mean?
Your variable-rate mortgage typically comes with an adjusting (floating) payment. A big bank may offer an adjusting amortization instead (variable rate) with a static payment, but it carries a risk for a payment shock at renewal (if your amortization has increased more than you thought).

About your Mortgage

Your mortgage contract is a pretty big deal (probably one of the biggest financial commitments you'll ever make), but don’t worry, it doesn’t have to be stressful. Here’s the lowdown on the essentials — everything you need to know to decode the fine print and work with your mortgage broker and lender like a pro.

Amortization

The amortization period is the total length of time you have to pay off your mortgage in full. A longer amortization period means lower monthly payments, but it also means you’ll pay more interest over the life of the loan. Lenders may offer a longer amortization period for an uninsured mortgage, allowing for more flexibility in your payments.
 

For an insured mortgage, the standard amortization period is 25 years. (As of Dec 15th, 2024 FTHB's can do 30 years!)

Principal (Balance)

The principal is the original amount you borrow from a lender to purchase a home. This is the loan amount that doesn’t include interest. Over time, as you make your mortgage payments, a portion of each payment goes toward reducing the principal.

 

As you continue making payments, the principal gradually decreases until the loan is fully paid off at the end of the amortization period.

 

Any extra payments you make always go straight to the principal

Interest Rate

The interest rate is the cost you pay to borrow money from a lender in order to purchase a home. 
The interest rate can vary based on several factors, including whether you choose a variable or fixed rate, the term of your mortgage, and the specific lender you work with.

 

Different lenders may also offer varying rates based on their policies, market conditions, and your financial profile. 

Registration Charge

When you register your mortgage, you can choose between standard registration and collateral registration.

With a standard charge, the lender’s claim is based on the actual loan amount you borrowed. This means that if you want to access additional funds in the future, you may need to refinance your mortgage or apply for a second loan.
 

A collateral charge allows the lender to register the mortgage for a higher amount, up to 125% of your home’s appraised value. This gives you more flexibility to borrow against your home equity later on without needing to refinance.

Term

The mortgage term is the length of time your interest rate and mortgage contract remain in effect with your lender. Typically, this term lasts anywhere from 3 to 5 years, though longer or shorter terms can be chosen. At the end of the term, you’ll need to either renew your mortgage with the same lender or switch to a different one.
 

The most commonly chosen term is 5 years, as it provides a good balance between stability and flexibility in terms of interest rates.

Payment

A mortgage payment is a regularly scheduled amount you pay to your lender, which combines both interest and principal. 

Over time, the portion of your payment that goes toward the principal increases, while the interest portion decreases.

For added convenience, some people choose to include property tax payments as part of their monthly mortgage payment. 

Fees & Penalties

Your mortgage contract outlines all the details about what you owe and when, covering various scenarios that might come up during your loan term.

This includes things like what happens if you decide to break your mortgage early. It’s designed to anticipate any changes in your situation, so you have a clear understanding of the terms and potential fees or penalties you might face, giving you a roadmap for managing your mortgage throughout its duration.

Fine Print

There may be other terms and conditions in your mortgage contract. Your mortgage broker or real estate lawyer can help uncover the details.

Pre-qualification vs pre-approval

Before you start shopping for your dream home, it’s important to know exactly what you can borrow.

A pre-qualification is a great first step, giving you an initial estimate of how much you might be able to borrow based on your income, credit, and other financial details.

However, when you're ready to hit the ground running and start looking at homes, a pre-approval takes things a step further. It gives you a more accurate picture of your borrowing power by reviewing your finances in detail, including things like credit history and debt ratios.

With a pre-approval in hand, you’ll have a clear understanding of your budget, which gives you the confidence to make an offer on a home you love—without the guesswork. This step ensures you’re not wasting time on properties that are out of your price range, and it can also help you stand out to sellers as a serious buyer.

Pre-Qualification

 

- Rough max purchase price based on verbal numbers

- Used to get a rough idea of where you stand

- Doesn't require your credit to be pulled

Pre-Approval
- Max purchase price based on documentation provided

- Used to go look for homes & speed up approval process

- Credit must be pulled

What NOT to do after getting a pre-approval

Making significant financial changes after you’ve received your pre-approval can put your final mortgage approval at risk when it’s time to close on your home. This is because lenders will recheck your financial situation right before closing to ensure you still meet their requirements.

If you take on new debt, like buying a car or opening new credit lines, or if your credit score drops, it could affect your debt ratios and your ability to secure the loan. Additionally, any changes to your income, such as a job change or reduced hours, can also impact your final approval.

To avoid complications, it's important to maintain a stable financial situation between your pre-approval and closing day.

Finding The Right Help

Realtor

 

An experienced, professional realtor can be an invaluable guide in helping you find the perfect home with the right features in the ideal neighborhood. While you may come across listings on the MLS®, your realtor has access to exclusive data—such as pricing details, recent sales, and market trends—that you won’t see. To ensure you’re working with the best, get a referral and don’t hesitate to ask plenty of questions. This will help you find the right fit and navigate the home-buying process with confidence.Have you signed up for our exclusive offers?

Home Inspector

 

A thorough, unbiased home inspection (be sure to include it as a condition in your purchase offer) can save you time, money, and a lot of headaches down the road. When choosing an inspector, look for someone with a solid reputation—check for a license (though not always legally required, it’s a good sign) and read reviews from past clients. Be sure to ask if you’ll receive a detailed, written report after the inspection, so you have a clear understanding of the home’s condition before moving forward.Have you signed up for our exclusive offers?

Lawyer

 

Take the time now to find an experienced lawyer—it’s one less thing to stress about if you need to make an offer on a home quickly. Even if you get a recommendation, it’s still a good idea to check reviews and ask questions. This will give you insight into how organized, knowledgeable, and prepared they are to guide you through the process.

Closing time.... 

From Pre-Approval to Keys in Hand

Your pre-approval gave you the numbers you needed for house hunting, but now the mortgage process gets real.

Your Conditional Mortgage Approval happens when the lender reviews your financial details. While it doesn’t guarantee full approval, it’s a strong sign that everything looks good so far.

Once your information is fully verified and your loan amount and mortgage terms are confirmed, you’ll receive an Unconditional Mortgage Approval from your mortgage broker (make sure to ask for this in writing).

At this point, you can notify your realtor and lawyer to waive your financing condition. Phew, you're almost there!

Financing Conditon

Complete your mortgage application. Conditional Approval is a sign to go forward with other conditions — but don’t waive this one until you receive Unconditional Approval

Home Inspection

Book your home inspection to occur after you receive conditional mortgage approval, but with enough time to go back to the seller if major problems are found.

Condo Docs (if applicable)

Again, conditional mortgage approval helps you to proceed to this review, which incurs a cost and may require time to react if issues are uncovered.

Will you lose your deposit if you back out now? Typically, no — you can change your mind during this phase with no repercussions (other than having to look for another home). Backing out after conditions are waived, however, may result in losing your deposit and the seller seeking further damages

Conditional Mortgage Approval happens when the lender reviews your financial details. While it doesn’t guarantee full approval, it’s a strong sign that everything looks good so far

Unconditional Mortgage Approval is granted by your mortgage broker once all your information has been fully verified and your loan amount and mortgage details are officially approved. Be sure to ask for a written confirmation of this approval.

What Can Interfere with Unconditional Approval?

 

❌ Your documents aren’t submitted on time.
❌ The loan amount you’ve requested exceeds what you can afford.
❌ A significant change in your job, debt, or credit happens after your pre-approval.
❌ Unforeseen issues with the property impact its value.

What’s Next with Your New Mortgage?

 

Your mortgage funds won’t be officially transferred until the closing date (you’ll provide your down payment through your lawyer before then). Be sure to mark the date of your first mortgage payment, which will be set based on the closing details.

Need to make any last-minute changes (like adjusting your payment frequency)? Be sure to ask your lender what’s possible before finalizing everything.

 

Firm Purchase


Once all conditions have been removed, both you and the seller are legally bound to the deal. However, the home isn’t truly yours until the closing date. That’s when your mortgage loan is funded and paid to the seller, and the ownership (home title) is officially transferred to you.

Is a walk-through included in your contract?

 

If so, you and your realtor will do a final walk-through of the home within 24 hours of your closing date. This gives you a chance to check for any major issues. If anything significant is found that needs attention, it could lead to a price adjustment or even a delay in closing.

Closing Costs


You’ll need to pay the necessary closing costs on time—if you can’t, the deal could still fall through. While some costs, like a home inspection, may be incurred earlier in the process, most closing costs are paid through your lawyer on the closing date.

Final Walk-Through Checklist


✔️ Ensure the property is in the agreed-upon condition (no damage or missing items).
✔️ Confirm that all inclusions (e.g., window coverings, appliances) are present.
✔️ Verify that any agreed-upon repairs have been completed.
✔️ Check that the home is clean and free of the seller’s personal belongings.

Closing Date: It’s Official—You Own Your Home!

 

Mortgage funds are typically released at 12pm (local time to the lender). Your lawyer will handle transferring the funds to the seller and registering the title change. Once everything is finalized, your realtor will arrange for you to get the keys.

 

The keys are yours!


Congratulations on your new home! You’ll probably find yourself wandering around, amazed that it’s all yours.

As you explore, take note of anything that needs attention or things you’ll want to bring before your move—like light bulbs, paper towels, bathroom essentials, water glasses, and a trash can.

When you head out, turn on a couple of lights (safely!) upstairs and don’t forget to lock your brand-new front door.

 

Enjoy your new place!