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Tips for First-Time Home Buyers

Buying your first home and not quite sure where to start? You’re not alone.

To help you move forward, we’ve put together this handy checklist. We hope this information helps you buy your first house, condo or townhome.

Did you know that there are 3 stages to buying a home? First comes planning, followed by finding your dream home, and finally, the closing.

Planning

When you’re a first-time home buyer, the process can feel exciting and a little scary. But if you do a little homework beforehand, buying your first home can be fun and rewarding. Here’s how you can make sure you’re prepared.

How much home can I comfortably afford?

It’s very easy to get emotionally invested in a home. But before you do, it’s important to see if you are financially ready. When calculating how much you can afford, think about the other costs associated with home ownership – insurance, taxes, utility bills, etc. The TD Mortgage Affordability Calculator can help you understand whether you can afford to purchase your dream home.

What is a down payment on a home?

A down payment is the money that you pay upfront towards the purchase of your home. Your down payment amount is usually described as a percentage of the total cost of your home.

If your down payment is less than 20% of the cost of your home, you will have to pay for mortgage default insurance. This helps protect your bank if you fail to make your mortgage payments.

Minimum down payment

Purchase price

Minimum down payment required

$500,000 or less

5% of the purchase price*

$500,000 to $999,999

5% of the first $500,000*

10% of the portion above $500,000*

$1 million or more

20% of the purchase price

*Mortgage default insurance required.

What should I look for when buying my first home?

During the home buying process, it’s natural to get excited. But it’s important to ask yourself a few questions:

  • How long will you live in this house?
  • Can you comfortably afford it?
  • Is this where you would like to live?
  • Does it offer room to grow?
  • Is transit easily accessible?
  • How long would your commute be?
  • What’s the school district like?

Use First-Time Home Buyer Incentives to your benefit1:

The federal government has several beneficial measures to help Canadians purchase their first homes.

Overview

Eligibility

Home Buyer's Plan (HBP)

The Home Buyer's Plan (HBP) allows first-time home buyers to withdraw funds from their Registered Retirement Savings Plan (RRSP) to use towards their first home.

To learn more about the application process, visit the Government of Canada's website.

To qualify for the HBP, you'll need to:

  • be considered a first-time home buyer
  • have a signed purchase agreement to buy or build a qualifying home
  • be a Canadian resident at the time of RRSP withdrawal and up until the time the qualifying home is bought or built
  • intend to occupy the new home as your primary residence within a year
  • meet RRSP withdrawal conditions

For full eligibility information, click here.

Home Buyer's Amount (HBA)

The Home Buyer's Amount (HBA) is a non-refundable income tax credit that can be applied to certain qualifying homes.

To learn more about the Home Buyer's Amount, visit Government of Canada's website.

To qualify for the HBA, you’ll need to:

  • be considered a first-time home buyer. You don't have to be a first-time home buyer if:
    • you are eligible for the disability tax credit, or,
    • you acquire a home for the benefit of a related person who is eligible for the disability tax credit
  • have purchased a qualifying home in Canada

For full eligibility information, click here.

First-Time Home Buyer Incentive (FTHBI)

The First-Time Home Buyer Incentive is a Government of Canada program designed to help eligible first-time home buyers by providing additional funds to put towards a down payment:

  • An extra 5% of the purchase price for a resale home
  • An extra 5% or 10% of the purchase price for a newly constructed home

This is in addition to your required down payment and is in the form of a shared-equity mortgage with the Government of Canada. The First-Time Home Buyer Incentive reduces the resulting monthly mortgage payments, giving support to first-time home buyers who qualify as they enter the real estate market.

Visit the CMHC (Canada Mortgage and Housing Corporation) website to learn more about the program.

To qualify for the FTHBI, you must:

  • be a Canadian citizen, permanent resident or non-permanent resident authorized to work in Canada
  • have an annual qualifying income of not more than $120,000 (or $150,000 in select cities)

For full eligibility information, click here.

GST/HST New Housing Rebate

The GST/HST New Housing Rebate offers qualifying home buyers a GST/HST rebate on the purchase price of a newly built or substantially renovated home.

To learn how to apply for the GST/HST New Housing Rebate, visit Government of Canada’s website.

You may be eligible for the GST/HST New Housing Rebate if:

  • you built or substantially renovated a qualifying home or purchased one from a builder
  • the home is your primary residence

For full eligibility information, click here.

Tax Free First Home Savings Account

A Tax Free First Home Savings Account (FHSA) combines some of the features of a Registered Retirement Savings Plan (RRSP) and Tax-Free Savings Account (TFSA).

Like an RRSP, contributions will generally be tax-deductible. Similar to TFSA withdrawals, when a qualifying withdrawal is made to purchase a qualifying home, the amount withdrawn, including any income or gain, is not taxable2.

Learn more

To be eligible to open an FHSA, you must be:

  • a Canadian resident
  • 18 years or older3
  • a first-time home buyer4

When should I apply for a mortgage pre-approval?

Try to follow a systematic approach to buying your home. While contacting a realtor and looking at homes, consider applying for a mortgage pre-approval. This will help you get an understanding of how much a lender could approve you for. Apply for a TD mortgage pre-approval online, and we will hold your interest rate for up to 120 days once you’re approved.

Finding your dream home

It’s time for the fun part. This is where you go on a journey of discovery to find a home that’s just right for you. Here are some factors to consider.

Do I need help with house-hunting?

A realtor can often help you with various aspects of the home buying process. Before choosing a real estate agent, meet with as many as possible and try to pick someone with excellent credentials and references. Remember, the agent is usually paid by the seller so it may not cost you anything to use one. If you find a home that has potential, consider hiring a home inspector in order to make sure there are no hidden problems.

What closing costs will I need to pay?

Besides saving for your down payment, you should set aside some money for closing costs. These additional expenses may eventually equal an amount up to 4% of the purchase price of the home. Closing costs can include home inspection fees, title insurance, adjustment costs, legal fees and more.

Which mortgage will work for me?

It’s important to explore all your options when financing a home. There are various kinds of mortgages.

Open/Closed:

These two types of mortgages offer different prepayment options. An open mortgage gives you the flexibility to make occasional or full prepayments at no charge. A closed mortgage cannot be prepaid, renegotiated or refinanced before maturity, except according to its terms.

Conventional/High-ratio:

A conventional mortgage is one where your down payment is more than 20% of the purchase price of the home. If you do not have 20% of the down payment and need to borrow more than 80% of the money you need, you will be applying for what is known as a high-ratio mortgage.

Fixed Rate/Variable Rate

With a TD fixed rate mortgage, your interest rate will stay constant for the term of your mortgage loan. With a TD variable rate mortgage, the interest rate will change when the TD Mortgage Prime Rate changes. If the interest rate goes down, more of your payment will go towards the principal. And if it goes up, more of your payment will go towards interest.

Need mortgage advice? Get support just for you with a call from a TD Mortgage Specialist.

Take a look at the latest TD Mortgage Rates.

What should be included in the offer to purchase?

Once you’ve found a home that meets your criteria, it’s time to get your real estate lawyer/notary to review the offer before handing it in. The offer must include your legal name, the amount you’re offering, the date the offer expires and any other conditions that need to be met before closing.

The closing and beyond.

Will I need home insurance?

Your lender will require you to prove you have homeowners' insurance at closing. You should ensure that you do your research to find the home insurance plan that is right for you. It will also have to meet your lender’s requirements and be comprehensive enough to cover the cost of repairing or rebuilding your home. Look for a customizable home insurance plan that will let you fine-tune your coverage.

What happens during the closing process?

There’s a lot of paperwork to deal with when you close on a purchase of a home. Your real estate lawyer/notary can help you understand the complex legal terms. Make sure you ask questions if you have any concerns. On closing day, your lawyer will proceed with final delivery of the closing funds to the seller’s lawyer. The last step is receiving the keys to your new home.

What are some ways to plan for the future?

Consider discussing your mortgage protection options with your lender. TD Mortgage Protection can pay all or part of the outstanding balance on your mortgage if you experience an unexpected covered event. This could help protect your loved ones from financial burden.

Now is also a good time to start saving for emergencies. Try to put away a small portion of your salary every month so you’re prepared for any additional expenses.

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