The First-Time Home Buyer Insider

How to Buy Your First Home in Canada 🇨🇦 A Step-by-Step Guide

Welcome to the First-Time Home Buyer Academy. My name is Tom Storey, and I’ve spent the better part of the last decade helping first-time buyers in Toronto and the GTA turn one of the most intimidating decisions of their life into one of the most rewarding.

If you’re reading this, you’re probably somewhere on the spectrum between “I think I want to buy a place someday” and “I need to buy something in the next ninety days or I’m going to lose my mind.” Both are fine. Both are normal. And both benefit from the same thing: a clear, unemotional playbook.

This guide walks you through the full journey, from your very first tax-advantaged dollar to the moment the keys land in your hand. Whether you’re eyeing a downtown Toronto condo, a semi-detached in the east end, or a freehold in the suburbs, the fundamentals are the same. Get educated, get organized, and work with people who treat your purchase like it matters.

Watch the full video breakdown here

Step 1: Maximize Your First-Time Buyer Savings Accounts

Before you open a real estate app, before you book a single showing, spend an hour understanding the three accounts the Canadian government has essentially built for people in your position. Used correctly, they can shave five figures off your tax bill and get you into a home faster than you thought possible.

The First Home Savings Account (FHSA)

This is the single best tool available to first-time buyers in Canada. Full stop.

You can contribute up to $8,000 per year to a lifetime maximum of $40,000. Contributions are tax-deductible, which means every dollar you put in reduces your taxable income for that year. When you eventually withdraw the money to buy a qualifying home, the entire withdrawal (including any growth) comes out tax-free.

Think about what that means. You get a tax deduction on the way in, like an RRSP. And you get tax-free growth and a tax-free withdrawal on the way out, like a TFSA. It’s the best of both accounts in one.

A few details that matter:

  • Unused contribution room carries forward (up to $8,000 at a time), so if you open an account this year and don’t contribute, you can put $16,000 in next year
  • You have to open the account to start accumulating room, so open one even if you can’t fund it yet
  • The account can stay open for 15 years or until you turn 71, whichever comes first
  • If you don’t end up buying a home, you can roll the money into your RRSP without affecting your RRSP contribution room

The RRSP Home Buyers’ Plan (HBP)

If you’ve been contributing to an RRSP through work or on your own, you can withdraw up to $60,000 per person (up from $35,000 before April 2024) to put toward your first home. For couples buying together, that’s up to $120,000.

The catch is that this is a loan to yourself. You have to pay it back into your RRSP over 15 years, starting the second year after withdrawal. Miss a repayment and that portion becomes taxable income for that year.

There’s also a 90-day rule. Money you deposit into your RRSP has to sit there for at least 90 days before you can withdraw it under the HBP. Plan accordingly if you’re trying to do a last-minute top-up.

The Tax-Free Savings Account (TFSA)

Your TFSA is the supporting character in this story, but it’s a useful one. Contributions aren’t tax-deductible, but everything inside grows tax-free and comes out tax-free for any reason at any time. For money you want to keep flexible (for example, cash you might use for a down payment or might use for closing costs, depending on how the purchase shakes out), the TFSA is ideal.

How to Stack These Accounts

The smart play for most first-time buyers goes something like this:

Max out your FHSA first. The combination of tax deduction and tax-free withdrawal is unbeatable.
If you have more to save, contribute to your RRSP and plan to use the Home Buyers’ Plan later.
Use your TFSA for any additional savings, especially the cash buffer you’ll need for closing costs, moving, and furniture.
A couple that opens FHSAs in the same year and funds them fully for five years can contribute $80,000 combined, plus another $120,000 through the RRSP HBP. That’s $200,000 of tax-advantaged down payment capital, before we even talk about a TFSA.

Step 2: Understand Minimum Down Payments and Mortgage Rules

You do not need 20% down to buy your first home in Canada. I repeat, you do not need 20% down. This is one of the most persistent myths I encounter, and it’s kept a lot of would-be buyers sitting on the sidelines paying someone else’s mortgage.

How Minimum Down Payments Actually Work
Canada uses a tiered system for minimum down payments on owner-occupied properties:

5% minimum on the first $500,000 of the purchase price
10% minimum on the portion between $500,000 and $1,499,999
20% minimum on any purchase price at or above $1,500,000

Let’s make that concrete. On a $700,000 condo, your minimum down payment is 5% of the first $500,000 ($25,000) plus 10% of the next $200,000 ($20,000), for a total of $45,000. That’s significantly less than the $140,000 you’d need if 20% were a hard rule.

The December 2024 Update That Changed Everything

On December 15, 2024, two big changes came into effect that materially improved the landscape for first-time buyers:

The insured mortgage cap went from $1 million to $1.5 million. This means you can now buy a home priced up to $1,499,999 with less than 20% down. In a market like Toronto, where the average detached home price sits well above $1 million, this is a game changer for anyone targeting a family home.

30-year amortizations are now allowed on insured mortgages for first-time buyers and for newly built homes.Previously, if you were putting down less than 20%, you were capped at a 25-year amortization. Stretching to 30 years lowers your monthly payment meaningfully, although you’ll pay more interest over the life of the loan. For many buyers, the cash flow relief in the early years is worth it.

What Is CMHC Insurance and Why Does It Cost More?

Any mortgage with less than 20% down requires mortgage default insurance, typically through CMHC, Sagen, or Canada Guaranty. The premium is added to your mortgage and amortized with it, so you don’t pay it out of pocket, but you do pay it over time.

Premium rates scale with how little you put down. At 5%, the premium is 4.00% of your mortgage amount. At 10%, it drops to 3.10%. At 15%, it’s 2.80%. Once you hit 20%, there’s no premium at all.

This is a real cost, and it’s one of the things we’ll weigh together when figuring out how much you should put down.

Step 3: Secure Your Mortgage Pre-Approval

Getting pre-approved is the equivalent of buying your plane ticket before you show up at the airport. You wouldn’t book a vacation without knowing whether you can afford the flight. Don’t look at homes without knowing what you can borrow.

Pre-Qualification vs. Pre-Approval
These terms get thrown around interchangeably, but they mean different things.

A pre-qualification is a soft conversation with a lender based on numbers you provide verbally. It’s a starting point, but it’s not binding and it doesn’t hold a rate.

A pre-approval involves submitting documents (paystubs, notices of assessment, employment letters, bank statements showing your down payment), running a credit check, and getting a written commitment from a lender that includes a rate hold, usually for 90 to 120 days.

Fixed Rate vs. Variable Rate

This is one of the bigger decisions you’ll make, and it’s a values question as much as a math question.

Fixed rate mortgages lock your interest rate for the term, typically 1 to 5 years. Your payment is predictable, but the penalty to break a fixed mortgage early can be brutal (usually the greater of three months’ interest or the interest rate differential, which can run into tens of thousands of dollars).

Variable rate mortgages fluctuate with the Bank of Canada’s overnight rate. When rates fall, you save money. When rates rise, you pay more. The penalty to break a variable mortgage is almost always just three months’ interest, which is far more manageable if life takes an unexpected turn.

My general rule of thumb is this: if you value predictability and plan to hold the property for the full term, fixed is a fine choice. If you want flexibility or have reason to believe rates will fall meaningfully during your term, variable deserves a hard look.

The Mortgage Stress Test

Every federally regulated lender has to qualify you at either your contract rate plus 2%, or the Bank of Canada’s minimum qualifying rate, whichever is higher. So even if your actual rate is 4.5%, you need to prove you could afford payments at 6.5%.

This exists to protect you from yourself. It forces a buffer into your budget so that a rate hike doesn’t immediately blow up your finances. It’s annoying. It’s also probably the right policy.

Documents You’ll Need

Have these ready when you start the pre-approval process:

  • Two most recent paystubs
  • Two years of T4s or Notices of Assessment (especially if you’re self-employed or commissioned)
  • Employment letter confirming position, salary, and length of service
  • Bank statements showing your down payment accumulating over at least 90 days
  • Government-issued photo ID
  • A list of current debts and monthly obligations

If you’re self-employed, expect the process to take longer and require more paperwork. Start early.

Step 4: View Properties Using the “Out of 10” Rule

Once you’re pre-approved and have a realistic price range, the fun part begins. This is also where most first-time buyers get into trouble. Emotion takes over. You fall in love with the kitchen. You ignore the weird floor plan or the strange smell in the basement. You overpay, or worse, you buy the wrong property.

The Out of 10 Rule exists to force clarity.

The Rule Is Simple
After every showing, rate the property out of 10. You’re not allowed to say 7.

That’s it. That’s the rule.

Why It Works
Seven is the noncommittal number. It’s the answer people give when they don’t want to think. By forbidding it, you force yourself to either round up and acknowledge that the property has real potential, or round down and admit it doesn’t.

Here’s how I coach clients to interpret their ratings:

6 or below: This is not the house. Move on. Don’t spend another minute on it. Don’t ask your agent to “just double-check the comps.” It’s not happening.

8 or 9: These are real contenders. Ask yourself what would push it to a 9.5 or 10. Cosmetic changes like paint, flooring, or a new kitchen backsplash? Often worth it. Structural changes like moving walls or adding a bathroom? Think hard and price it carefully.

10: The unicorn. If you find one, be prepared to compete. In a strong seller’s market, 10s get multiple offers and sell over asking.

The Second Rule: Sleep On It

Unless you’re in a bully offer situation or a multiple offer deadline, try to sleep on any property that rates 8 or above. A night of perspective is cheap. Overpaying for the wrong house is expensive.

Step 5: Master the “Big Five” of Making an Offer

When you find the right property, the paperwork looks intimidating. An Agreement of Purchase and Sale in Ontario is around 10 pages of legalese. As a buyer, you really only need to focus on five variables. Your agent handles the rest.

1. Price
The exact dollar amount you’re offering. Sounds obvious, but price is the result of a calculation, not a feeling. We’ll look at recent comparable sales, current active listings, days on market, and the seller’s motivation before we land on a number.

2. Deposit
The deposit is your skin in the game. In the Toronto market, deposits are typically 5% of the purchase price, delivered by certified cheque or wire transfer within 24 hours of an accepted offer.

Keep this money liquid. Do not invest it. Do not tie it up in a GIC that matures in three months. When your offer gets accepted, you need those funds available, in a bank draft, by the next business day.

3. Possession Date (Closing Date)
This is the day you get the keys and the property legally becomes yours. Typical closings run 30 to 60 days from the date of the accepted offer, but it can flex either way depending on the seller’s situation and your own. If you’re renting, coordinate your closing with the end of your lease to avoid paying two housing costs at once.

4. Irrevocable
This is the deadline you give the seller to accept, reject, or counter your offer. A typical irrevocable runs 24 to 48 hours, but in competitive situations it might be as short as a few hours. Once the irrevocable expires, your offer is off the table and the seller can no longer accept it.

5. Conditions
Conditions are clauses that protect you. They give you the right to walk away (and get your deposit back) if certain criteria aren’t met. The three most common for first-time buyers are:

Financing Condition: Gives you 5 business days (typically) to confirm your final mortgage approval with the actual property attached. Pre-approval is not final approval. The lender still has to approve the property.

Home Inspection Condition: Gives you the right to hire a qualified inspector to assess the property’s condition. If they find a structural issue, a failing roof, or a furnace on its last legs, you can walk away, negotiate a price reduction, or ask for a credit.

Status Certificate Review: Absolutely essential for any condo purchase. A status certificate is a package of documents that shows the condo corporation’s financial health, current rules, pending lawsuits, reserve fund balance, and any planned special assessments. I’ve killed deals over status certificates. You should never buy a condo without reviewing one.

In a hot market, some buyers waive conditions to make their offer more competitive. This is a calculated risk, and it’s one we’ll talk through together before you make that choice.

Step 6: Budget for Closing Costs

Your down payment is not the only cash you need on hand. Closing costs typically run between 1.5% and 4% of the purchase price, and underestimating them is one of the most common first-time buyer mistakes.

Land Transfer Tax

In Ontario, you pay provincial Land Transfer Tax on every property purchase. In Toronto, you also pay municipal Land Transfer Tax, which effectively doubles your LTT bill. This is a cash cost due on closing, not something you can roll into your mortgage.

The good news is that first-time buyers are eligible for rebates. In Ontario, the provincial LTT rebate can save you up to $4,000. In Toronto, the municipal LTT rebate can save you an additional $4,475. For a qualifying first-time buyer in Toronto, that’s a combined rebate of up to $8,475.

Real Estate Lawyer Fees

A real estate lawyer is legally required to close the transaction. They review your agreement, conduct the title search, request the status certificate for condos, handle all the closing paperwork, and transfer the funds. Expect to pay somewhere between $1,500 and $2,500 all in, depending on complexity.

Home Inspection

A pre-purchase home inspection typically runs $400 to $700 for a condo and $500 to $900 for a freehold home. Money well spent. I’ve seen inspections save buyers tens of thousands by flagging issues that would have been theirs to deal with post-closing.

Other Costs People Forget

  1. Title insurance (usually $300 to $500, often arranged by your lawyer)
  2. Appraisal fees (sometimes required by your lender, typically $350 to $500)
  3. Home insurance (prorated from closing, required by your lender before they’ll advance funds)
  4. Property tax adjustments (if the seller has prepaid taxes for the year, you reimburse them)
  5. Condo maintenance fee adjustments (same logic as property tax)
  6. Moving costs (easily $1,000 to $3,000 in the GTA)

 

Step 7: Analyze Market Data Like an Expert

Great agents don’t just open doors. They read the market. Before you make an offer, you should understand the data that drives pricing in your target neighborhood.

Days on Market (DOM)

DOM is exactly what it sounds like: how many days a property has been actively listed. In a hot market, homes sell in under 10 days. When something’s been sitting for 30, 45, or 60 days, you have leverage. Ask why. Is the price too high? Is there a defect? Is the layout unusual? Sometimes it’s just bad timing. Sometimes it’s a reason to negotiate hard.

Sale Price to List Price Ratio (SP/LP)

This ratio tells you how much over or under asking homes are selling for in a given area.

SP/LP above 100% means the average home is selling over asking (typical in a strong seller’s market)
SP/LP at 100% means homes are generally selling at asking price
SP/LP below 100% means buyers have room to negotiate below list
If the SP/LP in your target neighborhood is 105%, you should probably not be offering $20,000 under asking. Conversely, if the SP/LP is 96%, you’re leaving money on the table by offering full price.

Months of Inventory (MOI)

MOI tells you how long it would take to sell all the current listings at the current pace of sales. It’s the single best indicator of market balance.

Under 3 months: Seller’s market. Expect competition, firm offers, and pricing pressure upward

4 to 6 months: Balanced market. Reasonable negotiation, normal timelines, conditions usually accepted

Over 6 months: Buyer’s market. Sellers are motivated, conditions are easily included, price reductions are common

The Reverse Buyer Search

This is one of my favourite tactics for recalibrating buyer expectations. Instead of looking only at what’s currently for sale, ask your agent to send you properties that have already sold matching your criteria over the last 30 to 60 days.

Real sale prices, real comparable features, real timelines. Nothing calibrates a buyer’s expectations faster than seeing what their budget actually bought last month. It also shows you what types of homes are trading, which helps you position your own offer when the right one comes up.

Step 8: Calculate Your True Monthly Carrying Costs

Before you sign, run the numbers on what it will actually cost you to live in this property every month. Not just the mortgage. All of it.

The Full Monthly Picture

  • Mortgage payment (principal and interest)
  • Property taxes (in Toronto, roughly 0.7% of assessed value per year, divided by 12)
  • Home insurance (budget $80 to $150 per month for a condo, $150 to $250 for a freehold)
  • Utilities (hydro, gas, water, and internet, usually $150 to $400 per month depending on size and season)
  • Condo maintenance fees (if applicable, can range from $0.50 to over $1.00 per square foot per month)
  • Maintenance reserve (for freeholds, set aside 1% of the home’s value per year for long-term repairs)

A Real Example

A $750,000 Toronto condo with 10% down on a 30-year amortization at 4.5% fixed might look like this:

  • Mortgage payment: approximately $3,600 per month
  • Property taxes: approximately $430 per month
  • Condo fees: approximately $650 per month (at $0.70 per square foot on a 900 sqft unit)
  • Home insurance: approximately $50 per month
  • Utilities: approximately $150 per month (most condo fees cover heat and water)
  • Total monthly carrying cost: approximately $4,880.

That’s the number that matters. Not the sticker price. Not even the mortgage payment alone. The total monthly cost of being a homeowner at this property, compared to what you’re paying in rent today and what you’ll be paying for everything else in your life.

If the number keeps you up at night, the property is too expensive. Full stop.

Common First-Time Buyer Mistakes to Avoid

After years of walking first-time buyers through this process, the same mistakes come up over and over. Here are the big ones.

Shopping before you’re pre-approved. You’ll either fall in love with something outside your budget or waste weeks looking at things in the wrong range.

Confusing pre-qualification with pre-approval. The first is a conversation. The second is a commitment. Sellers can tell the difference.

Underestimating closing costs. If you only saved for the down payment, you’re going to be scrambling in the final weeks.

Waiving the status certificate review on a condo. I don’t care how hot the market is. This is the one condition I will push back on every time.

Buying based on the mortgage payment alone. You’re buying the full cost of ownership, not just the mortgage.

Treating the home inspection as a formality. A good inspector catches things that save you thousands. A bad one rubber-stamps the deal. Ask your agent for referrals, and actually read the report.

Trying to time the market perfectly. Nobody does. The best time to buy is when you have the financial foundation, the right property, and a long enough time horizon to ride out the cycles.

Why Working With the Right Agent Matters

Here’s the honest truth about Toronto real estate: the good agents and the average ones both charge roughly the same. The difference is in the outcomes.

A great agent saves you from bad decisions that would cost you $50,000 or more. A great agent knows which neighborhoods are transitioning up and which are starting to slip. A great agent tells you not to buy a specific property when their commission would say otherwise. A great agent treats your first purchase like the foundation for the next ten financial decisions of your life, because that’s exactly what it is.

The Storey team has dedicated first-time home buyer specialists.

Frequently Asked Questions

How much money do I actually need to buy a home in Toronto?

On a $750,000 condo with 10% down, you’re looking at approximately $75,000 for the down payment, plus another $15,000 to $22,000 in closing costs, for a total cash requirement of roughly $90,000 to $97,000. You can go lower with a smaller down payment, although you’ll pay more in mortgage insurance.

Can I use money gifted from my parents for the down payment?

Yes, with documentation. Your lender will require a signed gift letter from the family member confirming the money is a gift and not a loan, along with proof the funds were transferred to your account.

Should I buy a condo or a freehold as my first property?

Depends on your lifestyle, budget, and long-term plans. Condos are typically lower entry price points and come with fewer maintenance responsibilities, but they have monthly fees and less appreciation potential. Freeholds cost more up front and require more hands-on upkeep, but they historically appreciate faster and give you more control. We’ll talk through the trade-offs during our first meeting.

How long does the entire process take?

From first conversation to keys in hand, most first-time buyers take three to six months. That includes pre-approval, viewing properties, making offers, and closing. Some move faster, some slower. It depends on the market, your criteria, and how decisive you feel.

What happens if my offer gets rejected or I lose in multiple offers?

It happens, especially in competitive segments. We debrief, we learn, and we sharpen our approach for the next one. Losing a property is not failure. Buying the wrong property is.

Is now a good time to buy?

The honest answer is that it depends on your situation, not the market. If you have a stable income, a solid down payment, closing costs saved, and a time horizon of at least five years, the timing will work out. If any of those pieces are missing, the market being “good” won’t save you.

Ready to Begin Your First-Time Home Buyer Journey?

Buying your first home is one of the most significant financial decisions you will ever make. You deserve an agent who treats it that way.