Getting your first mortgage is one of the biggest financial decisions of your life. This guide walks you through every step, from understanding how much you can afford to closing day.
Can You Afford to Buy?
Before applying, check if homeownership makes financial sense for your situation.
| Factor | What to Check |
|---|---|
| Down payment saved | Minimum 5%, 20% avoids CMHC insurance |
| Stable income | 2+ years in same field (or same employer for best rates) |
| Credit score | 680+ for best rates, 600+ minimum |
| Existing debt | Low debt-to-income ratio |
| Job security | Avoid applying right after starting a new job |
| Emergency fund | Keep 3 months expenses after down payment |
Use our mortgage affordability calculator to see how much house you can afford.
Step 1: Know the Numbers
Minimum Down Payment Rules
| Home Price | Minimum Down Payment |
|---|---|
| Up to $500,000 | 5% |
| $500,001–$999,999 | 5% on first $500K + 10% on remainder |
| $1,000,000 and over | 20% |
Example: $750,000 home = 5% × $500,000 ($25,000) + 10% × $250,000 ($25,000) = $50,000 minimum down payment
Down Payment Under 20%: CMHC Insurance
If your down payment is under 20%, you must pay CMHC mortgage default insurance:
| Down Payment | Insurance Premium |
|---|---|
| 5%–9.99% | 4.00% of mortgage |
| 10%–14.99% | 3.10% of mortgage |
| 15%–19.99% | 2.80% of mortgage |
The premium is added to your mortgage, not paid upfront. On a $400,000 mortgage with 5% down, the CMHC premium is $16,000 — your actual mortgage becomes $416,000.
Upfront Closing Costs (Often Forgotten)
| Cost | Amount | Notes |
|---|---|---|
| Land transfer tax | 0.5%–2.5% of purchase price | Provincial (double in Toronto) |
| Legal fees + disbursements | $1,500–$3,500 | Always required |
| Home inspection | $400–$700 | Strongly recommended |
| Title insurance | $200–$400 | Required by most lenders |
| Property tax adjustment | Varies | First payment may be due at closing |
| Moving costs | $500–$3,000 | DIY vs professional movers |
| Typical total | $5,000–$20,000+ | Varies by province and price |
First-time buyers in ON/BC: Check first-time buyer land transfer tax rebates — up to $4,000 federal and $4,000 provincial.
Step 2: Get Pre-Approved
A mortgage pre-approval tells you how much a lender will lend you and locks in your rate for 90–120 days.
Pre-Approval vs Pre-Qualification
| Pre-Qualification | Pre-Approval | |
|---|---|---|
| Credit check | Soft check | Hard check |
| Income verification | Self-reported | Documented |
| Rate commitment | No | Yes (90–120 days) |
| Reliability | Low | High |
| Needed for home offers | No | Yes (recommended) |
Always get a pre-approval, not just a pre-qualification, before making offers.
Documents for Pre-Approval
| Document | What It Shows |
|---|---|
| 2 most recent pay stubs | Current income |
| 2–3 years T4 slips or NOA | Income history |
| Letter of employment | Confirms employment and salary |
| Bank statements (3 months) | Down payment source and savings |
| ID (government-issued) | Identity |
| SIN | Required for credit check |
| Statement of existing debts | Car loans, student loans, credit cards |
If self-employed, you will also need 2 years of NOAs and potentially T1 generals.
Step 3: Understand the Mortgage Stress Test
The B-20 stress test requires you to qualify at: The greater of: your contracted rate + 2% OR 5.25%
Example: Qualifying Rate Impact
| Offered Rate | Stress Test Rate | Effect |
|---|---|---|
| 4.5% | 6.5% | Qualify for 20–25% less |
| 5.0% | 7.0% | Qualify for 20–25% less |
| 6.0% | 8.0% | Qualify for 20–25% less |
This means your pre-approval amount will be less than if there were no stress test.
Gross Debt Service (GDS) ratio must be under 39% — total housing costs (principal, interest, property tax, heat) cannot exceed 39% of gross income.
Total Debt Service (TDS) ratio must be under 44% — all debts including housing cannot exceed 44% of gross income.
Use our mortgage qualification calculator.
Step 4: Fixed vs Variable Mortgage
| Fixed Rate | Variable Rate | |
|---|---|---|
| Payment | Locked for term | Changes with Prime Rate |
| Predictability | High | Low |
| Penalty to break | 3 months interest or IRD | Usually 3 months interest |
| Best when | Rates expected to rise; you want certainty | Rates expected to fall |
| Current spread (2026) | Usually 0.5–1% lower than fixed | — |
For most first-time buyers, a fixed rate provides peace of mind. A variable rate makes more sense if rates are expected to fall.
Step 5: Mortgage Term and Amortization
| Term | Amortization | |
|---|---|---|
| What it is | Length of rate commitment | Total loan repayment period |
| Common lengths | 1, 2, 3, 5, 10 years | 25 or 30 years |
| When it ends | Renew or refinance | Mortgage fully paid |
Most Canadians choose a 5-year term and 25-year amortization. A 30-year amortization lowers monthly payments but costs significantly more in interest.
Monthly Payment Comparison
| Amortization | $400K mortgage at 5% | Total Interest |
|---|---|---|
| 25 years | $2,326/month | $297,800 |
| 30 years | $2,147/month | $373,200 |
25-year saves ~$75,500 in interest over the full term.
Step 6: Choose a Lender
Mortgage Broker vs Bank vs Monoline Lender
| Option | Access | Rate | How |
|---|---|---|---|
| Mortgage broker | 20+ lenders | Best rates available | Online, phone, in-person |
| Big bank | One lender | Negotiable | Branch or online |
| Monoline lender | Low overhead, competitive | Often best rates | Via broker |
| Credit union | One lender | Often competitive | Branch |
Recommendation: Start with a mortgage broker (free to you, paid by the lender) to see all available rates. Then compare to your bank’s best offer.
Best Mortgage Lenders Canada 2026
See our best mortgage lenders Canada guide for current rate comparisons.
Step 7: Make an Offer and Close
Once pre-approved:
- Work with a real estate agent to find a home
- Make a conditional offer (include financing and inspection conditions)
- Pass the home inspection
- Firm up financing with lender (full application)
- Lender issues commitment letter
- Lawyer prepares closing documents
- You provide remaining down payment and closing costs to lawyer
- Title transfers on closing date — you get the keys
Timeline from Offer to Close
| Step | Typical Timeframe |
|---|---|
| Conditional offer accepted | Day 1 |
| Financing condition removed | 5–10 business days |
| Inspection condition removed | 3–7 days |
| Lender issues commitment | 5–7 business days after full application |
| Lawyer reviews documents | 1–2 weeks before close |
| Closing day | 30–90 days after offer (as agreed) |
First-Time Home Buyer Programs
| Program | Benefit | Eligibility |
|---|---|---|
| FHSA | Up to $40,000 tax-free toward down payment | First-time buyers |
| RRSP Home Buyers Plan | Withdraw up to $60,000 from RRSP | First-time buyers |
| First Home Buyers’ Tax Credit | $1,500 federal tax credit | First home purchase |
| Land Transfer Tax Rebate (ON) | Up to $4,000 | First-time Ontario buyers |
| BC First Time Home Buyers Program | LTT exemption up to $500K | First-time BC buyers |
See our first-time home buyer programs guide for full eligibility details.