Congratulations on taking the first step towards homeownership! Buying a home for the first time can be a daunting task, but our team is here to help guide you through the process.
As experienced mortgage brokers, we have access to a wide range of products and rates from various lenders, so we can find the perfect mortgage solution for your needs.
Let us help make your home buying journey a smooth and stress-free experience.
First Time Home Buyer Mortgage Considerations
If you're a first-time home buyer in Ontario, this guide is for you. It's designed to help you feel confident and informed as you move forward with your homeownership journey. We'll clear up any confusion and give you the information you need to feel confident in your decision. If you have any questions or just want to chat, don't hesitate to give us a call.
For First Time Home Buyers in Canada, the minimum down payment is 5% on the first $500,000 of the purchase price, and 10% down payment on any amount above $500,000.
If you put less than 20% down, the mortgage will be insured by CMHC, Sagen, or Canada Guaranty. This is known as mortgage default insurance and it protects the mortgage lender in the event that the mortgage borrower stops making payments.
Insurance premiums range between 2.4% and 4% of the mortgage amount depending on your down payment percentage. This insurance premium is added to your mortgage loan amount.
Insured mortgages tend to have the best mortgage rates because they are less risky for lenders, but their biggest drawback for borrowers, besides the cost, is that they can only be amortized over 25 years.
When your down payment is 20% or higher it is considered a conventional mortgage. No insurance is required, and it can be amortized over 30 years. When your amortization is higher it makes your regular payments lower and therefore increases the maximum mortgage amount you can qualify for.
Gifted Down Payment
Gifted down payment from a family member is a great way to get a head start.
Your parents (or another family member) may have equity in their home and would like to use some of it to gift you some money for down payment. We can arrange a new mortgage or home equity line of credit for them to access this money. Please talk to us about this option. We can help!
It's generally recommended to expect at least 1% of the purchase price in closing costs for first time home buyers.
For insured mortgages, lenders require you to have 1.5% of the purchase price available to you for closing costs (even if the actual closing costs end up being less).
We provide all of our clients with a closing costs document that breaks down all the costs so that there are never any surprises and so you feel comfortable the entire time.
Qualifying For Your First Mortgage
How much mortgage financing you qualify for in Canada depends on your Gross Debt Service (GDS) ratio, Total Debt Service (TDS) ratio, and overall credit.
Your GDS is the percentage of your household income that must go towards housing expenses. It can be no higher than 39%. Your TDS is the percentage of your household income that must go towards housing expenses and servicing your debt. It can be no higher than 44%. Some lenders allow for some wiggle room to these ratio guidelines in some scenarios.
When calculating your GDS and TDS a qualifying rate (also known as the “stress test” rate) is used. The qualifying rate used is 2% higher than the rate you will receive with your mortgage. The qualifying rate rule was introduced in 2018 to help ensure Canadian home buyers could continue to make their mortgage payments even if they had to renew their mortgage at a higher interest rate in the future.
If you’re ready to learn exactly what you qualify, connect with us today!
Credit Requirements for First Time Home Buyers
Having a high credit score is important, but what lenders are most interested in is your credit history and credit thickness.
For example, someone with no credit cards and only a student loan may have a high credit score, but thin credit.
Ideally, applicants should have at least two revolving credit lines (credit cards or lines of credit) with a credit limit of at least $2500, and a history of timely payments for at least two years.
While thin credit can be a concern for lenders, it's not necessarily a deal-breaker if your application is strong in other areas.
Connect with us to find out what you qualify for today!
When applying for a mortgage, the income that can be considered usually is your gross annual income.
Income from overtime, bonuses, commissions, or part-time work can be included if it is averaged over a two-year period.
If you are self-employed, there are ways to maximize the income that can be used in your mortgage application.
Regardless of your income type, we can get you pre-approved for the maximum amount possible.
Adding a Co-Signer or Guarantor
If you need to increase the amount you are approved for, you can consider adding a co-signer or guarantor to your mortgage application.
This is an option that we can discuss together, and I can explain the details to your family member who is considering co-signing so they can feel confident and comfortable with the process.
It is possible to remove a co-signer or guarantor once you qualify to carry the mortgage on your own.
Mortgage Rates for First-Time Home Buyers
Beware of very low mortgage rates you might see advertised online. These rates may come with additional penalties and restrictions that could cost you more in the long term and when it's time to renew.
Dominion Lending Centres is one of the largest mortgage brokerage companies in Canada, which means we are able to secure large volume discounts due to the high volume of business we do - and we pass this savings on to you.
We are dedicated to finding the right mortgage for you and can compare rates and products from all lenders to ensure you get the best deal possible.
Should You Use a Mortgage Broker or the Bank?
Working with a mortgage broker is free, it’s easy, and it saves you time and money.
Brokers now originate 47% of mortgages in Canada, up from 23% in 2003. This means more and more Canadians are realizing the benefits and savings that come with using a broker.
A bank can only offer you their mortgage products, while we can check with all lenders to get you the best rate possible for your situation.
In some cases, we can get our clients better rates from their own banks than what they can offer at the branch.
We work for you, not the bank!
Plus, you get unbiased advice from an experienced mortgage broker that is dedicated to you, and focused on giving you an amazing experience.
When you use a mortgage broker you do not need to open a new bank account or make any changes to your current banking procedures.
Bottom line: Your home purchase is one of the most important financial decisions you'll make, and getting professional, unbiased advice from an experienced mortgage broker makes sense.
Get your free no-obligation consultation today!
First Time Home Buyer Benefits Ontario
There are a number of benefits and incentives available to make buying your first home a little bit easier. Here is a summary of each of them:
First Time Home Buyer Land Transfer Tax Credit
First time home buyers in Ontario get a $4,000 rebate on land transfer tax. If you purchase in the city of Toronto you will also get a municipal land transfer tax rebate of $4,475!
First Time Home Buyer Tax Credit Ontario
You will get a tax rebate of $1,500 (up from $750 as of 2022) when you claim the first-time home buyer tax credit on your taxes for the year you buy your first home.
First Time Home Buyer RRSP Home Buyers Plan (HBP)
First-time home buyers can borrow up to $35,000 tax-free from their RRSPs to use towards down payment under the Home Buyers' Plan (HBP). If purchasing with another first-time home buyer, both of you can take advantage, for a total of up to $70,000.
The money borrowed from your RRSP's is considered an interest-free loan to yourself that you must pay back to your RRSP account within 15 years.
Tax-Free First Home Savings Account (FHSA)
Starting April 1st 2023, Canadian first time home buyers can open a Tax-Free First Home Savings Account (FHSA). This account combines the advantages of the registered retirement savings plans (RRSP) account and the tax-free savings account (TFSA).
First-time home buyers can save $40,000 tax-free with an FHSA to put towards buying your first home. Contributions to an FHSA are tax deductible, income and capital gains within the account are tax-free, and withdrawals are also tax-free.
First-Time Home Buyer Incentive Ontario
The First-Time Home Buyer Incentive is what’s known as a “shared equity” program. If you’re eligible, you can apply for a government loan worth either 5% or 10% of a home’s purchase price. The loan amount varies depending on the kind of home you’re buying and is interest-free, however, the government will own a portion of your home equity. The Incentive loan must be repaid after 25 years or when the property is sold and the repayment amount will depend on the value of the home at that time.
Although this program is rarely used due to its qualifications, it may be worth considering for some first-time home buyers who meet its requirements.
Getting Your First Mortgage Step-by-Step Process
As your mortgage broker, we will guide you through every step of the process and always be available to answer your questions.
Step 1: How to Apply for a Mortgage
The application process is simple with our secure online mortgage application. If you'd rather start by speaking with someone, we can discuss your goals and take your application information over the phone.
Once we know your goals and have your application details we can let you know what documents will be required. Providing us with documents via email is the easiest way.
Step 2: Your Pre-Approval
Once we have your information and supporting documents, we will discuss your options and be able to tell you your maximum purchase price.
We will show you how all the numbers will look for your mortgage and closing your purchase.
We can also do a 120-day rate hold at this time to protect you from rising rates while you look for your home.
Step 3: House Hunting and Making an Offer
With your maximum purchase price determined, you can begin looking for your new home with the Realtor of your choice.
We suggest you include a condition in your offer to give you at least one week to finalize arranging the mortgage financing.
After you have an accepted offer, we'll check with the lenders once again to find you the best deal and present you with your mortgage options.
Step 4: Mortgage Approval
An appraisal will be ordered if needed after we obtain a mortgage commitment from your chosen lender.
We will collect any additional documents from you, as well as send you mortgage documents to sign via DocuSign.
We'll explain everything in detail and be by your side the entire time so that you can remain confident and excited.
Step 5: Closing Your First Mortgage
The lender will send mortgage instructions to your lawyer’s office and they will complete the legal side of the transaction, disburse money to the sellers on the closing date, register the mortgage on your property, and register the property in your name.
Congratulation! Now, when you walk through the front door of your new home, you'll enjoy the confidence that comes with knowing you got the best mortgage rate and product for you. Plus, we're always here for you, including when renewal time comes around!
"What a great experience it was dealing with Catherine. She was incredibly helpful and organized, and truly puts her clients first. It is clear she loves what she does, and she has years of knowledge behind her. I would recommend dealing with Catherine for your mortgage needs over and over again."
“We had a fantastic experience working with Catherine. She is very professional, informative, and responsive. She helped us through the process of securing a mortgage for a new build and we knew we were in good hands from the beginning. We will certainly be using her in the future and would recommend her to anyone.”
“Catherine was absolutely amazing! I was a first time home-buyer and she was there to answer any questions I had (and there were a lot!) and never made me feel like I was bugging her. Her response time was absolutely incredible and I know I was getting the best service with her. 100% recommend Catherine to anyone :)”
“Great experience working with Catherine on buying our first home !”
“We had such an amazing experience working with Catherine throughout the process of purchasing our first home. She is incredibly professional, knowledgeable, and was always quick to respond to emails or phone calls (even on evenings or weekends). From the moment we met her, we knew that we were in good hands. If you are in search of a Mortgage Broker who genuinely cares about their clients, look no further than Catherine Evel! : )”
“Catherine and Richard made the process easy for us first-time home buyers. We also really appreciated the level of knowledge and professionalism they provided us. We will definitely work with them again for our future real estate needs!”
“Catherine is a professional that I’ve been dealing with since my first house. Her knowledge and helpfulness go beyond regular standards. This is the reason that I will contact her every time I need the broker advise. I am confident that she can help everyone, not matter the issue, that’s the way Catherine is.”
“I have been working with Catherine and her team for many years now. I trust her judgement on getting me the best mortgage rate for my investments and home. Polite, Professional, Knowledgeable, Patient and responsive to all my questions and concerns through the whole process. Couldn't be happier!!”
“Had a great experience. I had a short time frame to ensure I had funding for my mortgage and Catherine handled it with ease. Communication was quick, clear, and comprehensive. Absolutely would recommend.”
“I have used Catherine Evel as our Dominion Lender broker for 5 transactions now. Working with them definitely brings the stress of moving and remortgaging down. Very impressed with the efficiency and thoroughness of this group and I have recommended them to many others.”