5 tips for buying your first home

When figuring out how much you can afford for your first home, remember to factor in not just the price of the home you'll be buying. You'll also want to consider additional expenses such as your closing costs , to help you come up with a realistic home purchase budget that accounts for these other purchase-related costs as well.

When it comes to how much savings you'll need to buy a home, there's no one-size-fits-all answer: House prices vary across Canada (sometimes quite dramatically!), which means the amount you'll need for your down payment will also vary.

And don't forget about those additional home-purchase costs we mentioned above. Expenses like closing costs and legal fees can add up quickly, so having a clear idea of all these costs as well can help you set a realistic savings goal.

You might also be able to take advantage of government programs that help make home ownership more affordable for the first-time buyer, such as the Home Buyers' Plan and the First Home Savings Account. Ask your bank or lender about any programs that may be available for your financial situation, and for help making the most of them. 

There are a number of upfront costs you'll need to pay when purchasing a house or condo unit. To help you prepare, let's take a closer look at the down payment you'll need, plus break down what fees and expenses might be  included in your closing costs.

The amount you'll need for a down payment will depend on the price of the home you're buying. While the Government of Canada has set out minimum down payment rules, keep in mind these are just minimums.

Banks and lenders take into account your financial situation when making their lending decisions ² (for example, if your credit score is on the lower end or if you're already using a lot of the credit already available to you). So, depending on their assessment of your financial situation they may require you to make a down payment that's larger than the minimum when they're deciding on your mortgage application. Consider talking to them about your down payment early in your home purchase process, to help you understand what's expected and how much you should aim to save.

There's another important thing to consider when it comes to deciding on the amount of your down payment. If, despite meeting the minimum requirements, your down payment is less than 20% of the purchase price of the home you're buying, you'll also need to obtain CMHC (Canada Mortgage and Housing Corporation) mortgage loan insurance.³ Also known as mortgage default insurance, CMHC insurance will add to your overall borrowing costs. To help you budget for this extra cost, ask your bank or lender to walk you through how CMHC insurance works and what it means for your mortgage payments.

Closing costs are the expenses you need to pay upfront to finalize the purchase of your new house or condo unit. Your total closing costs will typically range from 1.5% to 4% of your home purchase price.⁴ Let's say you're buying a home priced at $660,000. Using the 1.5% to 4% range as a guide, you'd want to budget for between $9,900 to $26,400 in closing costs. To break it down a bit more, the following table sets out a number of common closing costs,⁵ based on the hypothetical purchase of a $660,000 home in Ottawa .

Table: Examples of common closing costs

Note: The amounts provided in this table are for the purposes of example only. Costs and fees can vary widely depending on factors such as your location and the service provider you've selected.

† Land transfer tax is also known as the welcome tax in Quebec.

‡ Typically, the seller's lawyer will provide any property tax adjustment amounts in the Statement of Adjustments.

§ Your closing costs may include other costs not mentioned in this table.

If you're purchasing a home in Quebec, Ontario, or Saskatchewan, and your mortgage requires CMHC mortgage loan insurance, you'll also need to pay provincial sales tax on your CMHC insurance premium, so be sure to budget for this amount as well.⁷

And while ongoing expenses such as home insurance and utilities aren't closing costs, don't forget you'll also be making your first payments for these types of expenses as well.

To find a good real estate agent for your needs, start by asking friends or family for recommendations and looking at online reviews—but don't stop there. Consider meeting with a few realtors to discuss your goals, and ask them about their experience with first-time buyers, their knowledge of the neighbourhoods you're interested in, and how they'll communicate with you.

With a good real estate agent by your side, you'll be getting an experienced professional who understands local market conditions, can help answer your important home purchase questions, and will be able to act as your advocate and advisor throughout your home buying journey.

While your real estate agent will be a good source of listings of homes for sale that could meet your needs, it doesn't hurt to do research yourself as well. For example, online real estate platforms often let you search and filter property listings by price, size, and neighbourhood, and browse through photos, floor plans, and detailed descriptions on specific listings.

And consider driving around the neighbourhoods you're interested in as part of your house hunting routine. In addition to helping you get a feel for the area, you might also spot some "For Sale" signs to investigate further. Once you've narrowed down a few options through your own research, your realtor can help schedule some showings so you can take a closer look.

Buying your first home is a big milestone — and a worthwhile investment in your future. You can help protect this investment with home insurance that meets your needs. Get a quote online today — it's a quick and easy way to find coverage options to fit you and your new home.