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10 Steps to Buy a Home

June 21, 2019
10 Steps to Buy a Home

Tips for newcomers on buying a first home in Canada

There are approximately 250,000 newcomers to Canada each year. If you’re one of them, buying a home could be one of the bigger challenges you’ll face. We offer resources to help you understand how the Canadian housing system works and how to find and rent or buy a home Learn more by visiting our newcomers website at cmhc.ca/newcomers.


Is homeownership right for you?

Buying a home is one of the biggest decisions you’ll ever make. To ensure that you make the best choice, ask yourself a few questions. What do you really want in a home? What is your current financial situation? What are your financial and lifestyle needs?

The real costs of homeownership

As a first-time buyer, you might not be aware of all of the costs associated with homeownership.

Upfront costs

The initial amount of money you need to buy a home, including the down payment, the closing costs and any applicable taxes.


Ongoing costs

The continued cost of living in a home you own, including mortgage payments, property taxes, insurance, utility bills, condominium fees (if applicable) and routine repairs and maintenance


Major repairs

Large and expensive repairs and renovations your home will eventually need, such as roof replacement or foundation repair.


If you choose a property that is not hooked up to municipal services such as water and sewer, there may be additional maintenance costs to consider.

Are you ready to own a home?

Buying a home isn’t for everyone. Before you make any decisions, consider the following questions

Are you financially stable?
Do you have the financial management skills and discipline to handle this large of a purchase?
Are you aware of all the costs and responsibilities that come with being a homeowner?
Are you ready to devote the time to regular home maintenance?

Renting versus buying: Pros and cons

Start by finding out the average home price in the area where you want to live.

Next, make a list of the pros and cons of owning versus renting to see which option is best for you. Use the following as examples.



  • Less maintenance and repairs
  • Lower monthly and upfront costs
  • Shorter-term commitment, making it easier to move to a new home, neighbourhood or city
  • Protection from decrease in property values
  • Possibility to free up cash to invest or to save a larger down payment for a home


  • Monthly payments may increase year after year
  • The risk that your lease won’t be renewed
  • You are paying someone else’s mortgage rather than building equity of your own
  • Protection from decrease in property values
  • You can’t paint or remodel without the landlord’s permission



  • Freedom to renovate or modify your home as you wish
  • You are building up equity in a safe, secure investment as you pay down your mortgage
  • Potential for rental income if you include a secondary suite
  • Protection from decrease in property values
  • Stability and peace of mind that comes from being in control of your investment and owning the place where you live


  • The risk of financial loss if your home has lost value when you sell
  • Responsibility for all ongoing costs including mortgage principal and interest, property taxes, insurance and maintenance
  • Monthly payments can increase significantly if interest rates go up at renewal time
  • Monthly payments can increase significantly if interest rates go up at renewal time
  • Possibility of unexpected and potentially costly repairs

There are advantages to both renting and owning a home. Make sure you understand the benefits and responsibilities of each before you decide what’s right for you.

Learn more about renting a home at cmhc.ca/renting.

Newcomers to Canada can also visit cmhc.ca/newcomers.


Are you financially ready to own a home?

It’s important to figure out how much you can afford to spend before you start looking for a home. Your mortgage payment will probably be the biggest expense, but there are other costs you should be aware of. You don’t want any unpleasant surprises!

The more you know about your current financial situation, the more prepared you’ll be when you meet with your lender or broker. These calculations will clarify your current financial picture and help you figure out how much you can afford

Household expenses
  1. groceries
  2. tuition
  3. clothing
  4. gifts
  5. housing maintenance
  6. child care
Entertainment expenses
  1. dining out
  2. spectator events
  3. magazines and books
  4. hobbies
  5. travel
Loans and debts
  1. credit cards
  2. car loans
  3. personal loans
  4. lines of credit
  5. student loans
  6. mortgages for properties already owned
Savings and donations
  1. RRSP
  2. TFSA
  3. savings accounts
  4. charitable gifts

Second, subtract that number from your total monthly net income (the amount of money your household earns on a monthly basis after taxes and deductions)

The difference is how much money you have left each month after expenses.

CMHC offers several online calculators that help with everything from figuring out your household budget to calculating your maximum home price and monthly payments.

To use these tools, visit cmhc.ca/calculators.

Calculation 2: How much can you afford?

Calculate how much you can afford to spend on housing each month without putting your financial health at risk.

These two simple rules will show you what you can afford to pay for a home. Understanding these rules can also help you when it’s time to get approved for a mortgage

Affordability rule 1

Your monthly housing costs should be no more than 32% of your average gross monthly income. This percentage is known as your gross debt-to-income or gross debt service (GDS) ratio.

Housing costs include:
  • your monthly mortgage payment (principal and interest)
  • property taxes
  • heating expenses
  • 50% of condo fees (if applicable)

Affordability rule 2

Your monthly debt load should be no more than 40% of your average gross monthly income. This percentage is known as your total debt-toincome or total debt service (TDS) ratio.

Your monthly debt load includes:
  • Monthly payments may increase year after year
  • The risk that your lease won’t be renewed
  • You are paying someone else’s mortgage rather than building equity of your own
  • Protection from decrease in property values
  • You can’t paint or remodel without the landlord’s permission

The maximum amount you can afford to spend on a home depends on these numbers and the size of your down payment. For first-time buyers, saving a down payment can be the hardest part of buying a home.

Calculation 3: Figure out the upfront costs

Figure out how much you need to save to cover the upfront costs associated with buying a home. For example, have you saved enough to pay the following expenses?


Down payment — the part of the home price that is paid when you make an offer to purchase Home inspection and appraisal fees Insurance costs — including property insurance, mortgage loan insurance, etc Land registration fee — based on a percentage of the purchase price of the property Prepaid property taxes and utility bills — you may have to reimburse the seller for bills paid in advance Legal or notary fees Potential repairs or renovations Moving costs GST/HST/QST on the purchase price (for newly built homes) or on the mortgage loan insurance (if applicable)

Calculation 4: How will your budget look as a homeowner? (And will you still meet the affordability guidelines?

Now that you have an idea of what a house costs and you know your current financial situation, return to Calculations 1 and 2 and complete the “Future” section (column 2) in the workbook

Be sure to include every expense you can think of. If in doubt, it’s better to include too much than not enough.

If your monthly housing costs are over 32% and your debt load would be more than 40% of your gross income, you may have trouble qualifying for a mortgage.

What should you do next?

If you can afford the home you want, you are ready for Step 3.

If you think you’ll have trouble making mortgage payments or you’re concerned about your finances, you can still make changes.


Remember, your first home doesn’t have to be your dream home. A few changes in your monthly budget or your expectations can go a long way toward making your dream of homeownership a reality.

Another choice you will need to make is deciding between a new home, one that has been previously owned (a “resale” home) or one that you will build yourself. Take time to carefully consider each option.


Financing your home

It’s time to meet with your mortgage lender or broker to discuss your financing options and confirm that you are financially ready to buy a home. They will discuss mortgage terms and interest rates and will explain what you must do to ensure that you get approved for a mortgage once you find your home.

Get pre-approved

It’s a good idea to get pre-approved for a mortgage before you start looking for a home. But first you need to understand exactly what being “pre-approved” means.

A pre-approved mortgage lets you know how much you can afford, what your interest rate will be and what your monthly mortgage payments will look like. Getting pre-approved can help you narrow your search down to a specific home type, size or neighbourhood.

It’s a good idea to get pre-approved for a mortgage before you start looking for a home. But first you need to understand exactly what being “pre-approved” means.

Getting pre-approved is not a guarantee of final approval for a mortgage. Once you find the home you want to buy, the property still has to be evaluated to ensure the price and condition of the home are acceptable to your lender.

Mortgage basics

You will have many options when it comes to choosing a mortgage. Your lender or broker will help you find the mortgage that best matches your needs.

Become familiar with the following terms and options to help with your decisions.

Amortization period: The length of time you agree to take to pay off your mortgage (usually 25 years).

Payment schedule: How often you make your mortgage payments. It can be weekly, every two weeks or once a month.

  • Fixed rate—The rate doesn’t change for the term of the mortgage
  • Variable rate—The interest rate fluctuates with market rates.
  • Protected (or capped) variable rate—The rate fluctuates but will not rise over a preset maximum rate.

Mortgage term: The length of time that the options and interest rate you choose are in effect. It can be anywhere from 6 months to 10 years. When the term is up, you can renegotiate your mortgage and choose the same or different options.

Open and closed mortgages:

  • Open mortgage—Lets you pay off your mortgage in full or in part at any time without any penalties.
  • Closed mortgage—Offers limited (or no) options to pay off your mortgage early in full or in part, but it usually has a lower interest rate.

Conventional and high-ratio mortgages:

  • Conventional mortgage—A loan that is equal to or less than 80% of the lending value of a home. This requires a down payment of at least 20%.
  • High-ratio mortgage—A loan that is over 80% of the lending value of a home. This means the down payment is less than 20% and will likely require mortgage loan insurance.

Pre-payment options: The ability to make extra payments, increase your payments or pay off your mortgage early without incurring a penalty.

Portability: An option that lets you transfer or switch your mortgage to another home with little or no penalty when you sell your existing home. Mortgage loan insurance can also be transferred to the new home.

Don’t leave home without them!

Bring the following information when you meet with your lender or mortgage broker. This will help them determine whether you qualify for a mortgage.


Know your credit score

Your credit score is a snapshot of your financial health at a specific point in time. It shows how consistently you pay off your bills and debts. A good credit score is incredibly valuable.

Lenders and brokers will look at your credit history when deciding whether or not to approve you for a mortgage. Before you apply, it’s a good idea to get a copy of your credit report to make sure there aren’t any mistakes or surprises.

Learn more about credit reports and credit scores and get tips on maintaining a good credit history at cmhc.ca/creditreport.

Mortgage loan insurance

If you have less than 20% saved for a down payment, you’ll probably have to get mortgage loan insurance. It protects banks and other lenders against the risk of mortgage default, just like property insurance protects you in case of loss. CMHC is a provider of mortgage loan insurance.

Insurance premiums on mortgage loans are calculated as a percentage of your total loan amount. They’re based on factors including the size and source of your down payment.

In general, the smaller the down payment is, the higher the insurance premiums will be.

You can usually pay your mortgage loan insurance premiums up front or have them added to your mortgage loan. You may have to pay tax on the total amount of the premiums if your province charges sales tax.


Tips for planning and managing your mortgage

When financing a home, make sure you’re prepared to deal with any challenges that come up. These can include a loss of income, increased expenses or rising interest rates. The following tips can ensure you’re financially stable through any ups and downs.

Choose a smaller mortgage. Get a smaller mortgage than the maximum amount you can afford. This will keep your monthly housing costs lower and allow you to deal with sudden changes in your income or expenses.

Evaluate the impact of higher interest rates on monthly payments. With a variable rate mortgage, even a small increase in interest rates could have a big impact on your monthly costs. Taking time now to learn how changing rates could affect you may help you avoid financial problems in the future.

Plan to be mortgage free sooner. You can pay down your mortgage faster by making your payments weekly or every two weeks. You can also increase the amount of your regular payment or make additional lump sum payments if your mortgage allows it

Be proactive and ask for help if you need it. If unexpected challenges affect your ability to make mortgage payments, contact your lender or broker as soon as possible. They can work with you to find a solution to any temporary financial setbacks.


Finding the right home

Now that you have a clear picture of your finances and mortgage options, it’s time to start thinking about the kind of home you want to buy. Look for a home that will meet your needs not just today, but also 5 or even 10 years into the future

What do you want or need in a home?

Make a list of your requirements and preferences for a home. Consider the following factors and questions in your list.


Do you want to live downtown, in the suburbs or in a more rural environment? Does the neighbourhood have a look and feel that suits your style? Do you want to live close enough to work, school, shopping, recreation facilities, health services and public transit that you won’t need a car to get around?


How many bedrooms or bathrooms do you need? Do you need space for a home office or for extra storage? Do you need a garage?

Special features

Is an air conditioner or a swimming pool on your list? Do your family members have allergies, environmental sensitivities or other special needs? Is it important that your home be energy efficient and environmentally friendly? Will you need it to adapt to changing needs as you age?


Are you planning to have children? Do you have any teenage children who will be moving away soon? Are you close to retirement? Do you want to live where you can go for walks or take your kids to a park? Do you want to live close to a community centre or place of worship? Is it important that you live close to family and friends?


The home you choose today will have an impact on your lifestyle and your finances for years to come. Take the time now to make the best decision for you and your family.

If you are considering living in the suburbs, you may be able to buy a larger home, but you may also have a longer commute to work or school. Be sure to weigh each decision carefully.

Forms of homeownership

One of your biggest decisions when looking for a home is what kind of ownership suits you. Options vary slightly between provinces, but the following are some of the most common ownership types in Canada.


You own the building and the land it rests on. You are responsible for the costs and maintenance of the property, but you also have full use and control of the land and the building. This is subject to any rights of the Crown, local bylaws and any other restrictions in place at the time you purchase the property.

Condominium (or “strata”)

You own your unit and share ownership of the common areas with other unit owners Common elements can include exterior walls, windows, gardens, driveways, hallways, elevators, lobbies and social areas The condominium corporation is responsible for the repair and maintenance of the common property. The corporation may also regulate the types of changes you can make to your unit


You own the building or unit and rent or lease the land it sits on. This type of ownership is common for townhouses or apartments built on city-owned land and mobile units on leased land

Co-operatives (co-ops)

Instead of purchasing a specific unit, you buy a share in the entire building and are assigned a unit to live in. When you decide to sell your share, the co-operative’s board members can reject buyers they feel will not be an asset to the community. Mortgage loan insurance is not available for co-operatives, so you’ll need a down payment of at least 20% of the purchase price.


Thinking about buying a condominium?

If you’re considering a condo, be sure to review the financial and technical audits for the condominium corporation to avoid surprises later on.

Visit cmhc.ca/condoguide for more information.

Homebuying or homebuilding?

Another choice you will need to make is deciding between a new home, one that has been previously owned (a “resale” home) or one that you will build yourself. Take time to carefully consider each option.

New home

Is the home built and ready to move into, or will you have to wait for the construction to be completed? If the move-in date gets delayed, how will that impact your plans and finances?

Previously owned

How is the condition of the home? Are any major repairs or renovations needed in the short, medium or long term? If so, can you add the cost of the repair or renovation to your mortgage?

Build your own

Building a home is a great way to get exactly the size, style, features and quality you want. It can also be a significant investment of time and energy.

Whatever you decide, talk to your lender or broker about financing options for building, renovating or making major repairs.

Start your search

Once you know what kind of house you’re looking for, you can begin your search. This can be done through:

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word of mouth
social media
newspapers and real estate magazines
visits to new housing developments
real estate websites and Internet searches
“for sale” signs
a real estate agent

Useful tips for your home search

Whether or not you’re working with a real estate agent, visit lots of homes before choosing one. Revisit promising homes and keep records of each home’s energy rating, utility costs and major repairs.

Your homebuying team: Who should you call?

Whether it’s your first time buying a home or you’ve done it before, it’s good to have a team of experienced professionals to help you along the way.

Real estate agent

An agent can help you find a home, tell you about the community, make an offer for you and negotiate the best deal. They can also help you find qualified professionals to fill the other positions on your team. When looking for an agent, don’t be afraid to ask questions. Normally, the seller pays a commission to the agent, but some agents also charge buyers for their services. To find out more, visit the Canadian Real Estate Association (CREA) website at crea.ca or call your local real estate association.

Insurance broker

You will need property insurance to cover the replacement cost of your home and its contents in case of loss. It is also a good idea to get mortgage life insurance, which will protect your family if you die before your mortgage is paid off. An insurance broker can help you with this.

Home inspector

Whether you’re buying a new or a resale home, you should have it inspected by a professional home inspector. The inspector will assess the condition of the house and tell you if any major repairs or replacements are needed.


An appraiser can make sure you don’t pay too much by telling you how much a property is worth before you make an offer. In some cases, your lender may ask for an appraisal before approving you for a mortgage.

Land surveyor

You will probably need a survey or certificate of location as part of your mortgage application. If the seller doesn’t have one, you’ll need to hire a surveyor and get permission from the seller to go onto the property. If you have title insurance, you may not need a land survey.

Builder or contractor

If you’re building a new home or your home needs extensive renovations, you’ll need to hire a builder or contractor. Ask candidates for several references and check them carefully. You can also visit other homes they’ve built and ask if they are members of a homebuilders’ association.

Lender or broker

There are many lending sources for mortgages, including banks, trust companies, credit unions and pension funds. Each offers different terms and options, so be sure to shop around! Mortgage brokers can be a good resource, as they can work with more than one lender. To find a lender or broker, ask your real estate agent, friends or family members for recommendations.

Lawyer or notary

A lawyer (or notary in Quebec) will protect your legal interests. They make sure that the property you want to buy is free of any liens, charges and work or cleanup orders. A lawyer or notary will also review all contracts before you sign them, especially the offer to purchase.

Do your research!

It’s important to research the people who will help you buy your home. Ask real estate agents, lawyers or any other housing professionals for their references and qualifications. The more information you have, the better prepared you will be to make the best decision.


Making an offer and closing the deal

Congratulations! You’ve chosen a mortgage that works for you, found a home that fits your budget and put together your homebuying team. Now it’s time to make an offer and close the deal!

Making an offer

Once you’ve found the home you want to buy, you need to give the seller an offer to purchase (also called an “agreement of purchase and sale”). An offer to purchase is a legal contract that should be carefully prepared by your real estate agent and/or lawyer (or notary in Quebec).


Your offer should include:

  • your legal name, the name of the seller and the address of the property
  • the purchase price (the amount you’re offering to pay)
  • the amount of your deposit
  • any extra items you want included in the purchase such as window coverings or appliances
  • the closing date, which is the date you want to take possession of the home (usually 30 to 60 days after the agreement is signed for existing homes and longer for newly constructed homes)
  • a request for a current land survey of the property
  • the date the offer expires
  • any other conditions that must be met, such as a satisfactory home inspection or lender approval of your financing

The contract will only become final once all the conditions have been met.

You should expect to negotiate. While the process can be stressful, it’s all about making the best deal for you and the seller.

Getting a mortgage

Once your offer is accepted, visit your lender or broker to verify and finalize the details of your mortgage. Be sure to review any conditions that were part of the offer. Your lender or broker can advise you on exactly what you will need to bring to the meeting, but the following information will likely be required.


Don’t forget to change your address!

You’ll need to notify healthcare professionals, government agencies, service providers and several others when you know your new address.

Closing day

Closing day is an exciting time. It’s when you finally get to take legal possession of your new home. The final signing generally happens at your lawyer or notary’s office along with the following events.


After you buy

Maintaining your home and protecting your investment

Becoming a homeowner is a major responsibility. It’s up to you to take care of your home and protect what is likely your biggest investment.

Make your mortgage payments on time

You can make your mortgage payments weekly, every two weeks or once a month. Whichever schedule you choose, always make your payments on time. Late or missed payments may result in charges or penalties, and they can negatively affect your credit rating. If you’re having trouble making payments, talk to your lender as soon as possible

Plan for the costs of operating a home

You will have several ongoing costs besides your mortgage, property taxes and insurance. Maintenance and repair costs are at the top of the list, along with expenses for security monitoring, snow removal and gardening. If you own a condominium, some of these costs may be included in your monthly fees.

Live within your budget

Prepare a monthly budget and stick to it. Take a few minutes every month to check your spending and see if you’re meeting your financial goals. If you spend more than you earn, find new ways to earn more or spend less.

Save for emergencies

Your home will need some major repairs as it ages. Set aside an emergency fund of about 5% of your income every year so you’ll be prepared to deal with unexpected expenses.


Keep your home safe

Be prepared for emergencies before they happen.

  • Prepare an evacuation plan in case of a fire.
  • Store your valuables in a safe place.
  • Dispose of any dangerous materials properly.
  • Check fire extinguishers, smoke alarms and carbon monoxide detectors on a regular basis.

Home improvements

As a new owner, you may plan on making improvements to your home. Some renovations can almost pay for themselves over time, especially if they result in savings on utility bills or a higher resale value in the future. Other renovations are worthwhile because they add comfort, enjoyment or functionality to your home.

Keep in mind that home prices are influenced by the price of similar homes in the neighbourhood. Don’t go overboard with home improvements unless you plan to stay in your home for many years to come.

If you plan to make energy efficiency improvements when you purchase an existing home, you may be eligible for a CMHC Green Home partial premium refund.

Learn more at cmhc.ca/greenhome.


Talk to your lender or broker if you’re buying a home that needs repairs or renovations. There may be options available that can help you finance the repairs and renovations as part of your mortgage loan.

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