Understanding Your Budget
Buying your first home is an important milestone. Before you look at listings, define what you can comfortably afford. Review your income, monthly expenses, and savings to set a realistic price range. Remember that homeownership comes with ongoing costs. Property taxes, utilities, maintenance, and insurance should all fit into your monthly budget.
Once your budget is clear, consider getting a mortgage pre-approval. A pre-approval tells you how much a lender is willing to provide. It also shows sellers that you are prepared, which can strengthen your offer in competitive situations.
Documents You Will Need
Having the right documents ready helps your mortgage application move smoothly. Lenders usually request:
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Government-issued photo ID
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Proof of income (pay stubs or employment letter)
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Credit report or score
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Proof of down payment funds
If you are self-employed, lenders may ask for tax returns or bank statements showing consistent income. If part of your down payment is gifted, you may need a signed gift letter explaining that the money does not need to be repaid.
Down Payments and Closing Costs
In Canada, the minimum down payment depends on the home’s purchase price. Homes under $500,000 require at least 5% down. For homes priced higher, the required percentage increases for the portion above $500,000.
Beyond the down payment, plan for closing costs. These may include legal fees, title insurance, land transfer tax, appraisal fees, and home inspection costs. First-time buyers may qualify for a partial land transfer tax rebate, depending on location.
Importance of a Seasoned Deposit (90 Days)
Lenders often require proof that your down payment funds have been in your account for at least 90 days. This is known as “seasoning.” It confirms that the money is legitimately sourced and helps prevent issues with verification. A well-documented and seasoned deposit strengthens your mortgage application and can help avoid delays during approval.
Market Example: Toronto Condominium Purchase
Consider a buyer looking for a two-bedroom condo in Toronto, where prices commonly range from $700,000 to $900,000. A 5% down payment may meet minimum requirements, but it will lead to higher monthly mortgage payments and mortgage insurance costs. Saving a larger down payment reduces borrowing costs and increases flexibility. It also improves your position when competing with other buyers, as sellers often prefer offers backed by strong financial readiness.
Buying your first home involves preparation and informed decision-making. Establishing a clear budget, organizing the necessary documents, understanding down payment requirements, and ensuring your deposit is properly seasoned will help you move through the process with confidence. With careful planning and a realistic approach, your first purchase can be both stable and achievable.