Review Your Finances Before Applying

Start by listing your income, savings and debts. Then look at how much you spend on debt payments each month.

Review your credit report for errors and raise any concerns with the credit bureau. Your broker can also help you identify questions about your borrowing history.

Plan Your Next Steps

First, discuss your finances before making major changes. For example, ask how paying down a loan might affect your down payment savings.

Similarly, speak with your broker before taking on new debt during your home search. A new payment may change your mortgage options.

You do not need perfect finances to start a conversation. Instead, use that discussion to build a realistic plan.

Understand the Minimum Down Payment

The minimum down payment depends on the purchase price. For an eligible owner-occupied purchase, the standard minimums are:

• For homes costing $500,000 or less, the minimum is 5%.
• Above $500,000 but below $1.5 million, you need 5% of the first $500,000. In addition, you need 10% of the remaining price.
• At $1.5 million or more, the minimum is 20%.

However, your lender may require a larger down payment. Therefore, confirm the amount for your planned purchase.

A Down Payment Example

For example, consider an $800,000 home. The standard minimum down payment totals $55,000.

The first $500,000 requires $25,000. Meanwhile, the remaining $300,000 requires another $30,000.

A down payment below 20% typically requires mortgage default insurance. This insurance protects the lender if you fail to repay the mortgage.

Saving more reduces the amount you borrow. However, keep enough money available for closing and unexpected costs.

Explore Your Mortgage Options Early

A preliminary mortgage review can help you estimate your borrowing range. Your broker will discuss your income, debts, down payment and plans.

However, lenders use different definitions for pre-qualification and pre-approval. Ask what the review includes and which documents still need checking.

Know What Remains Outstanding

Pre-approval does not guarantee final financing. The lender must still assess the property and confirm that you meet its requirements.

Therefore, contact your broker when you find a home. Also, discuss financing conditions with your real estate representative and lawyer before committing.

Gather Your Mortgage Documents

Before you apply, ask your broker for a checklist. Although requirements vary, common documents include:

• Valid identification
• Recent pay stubs and proof of employment
• Tax documents, where required
• Bank records showing your down payment funds
• Details of loans and other debts

If you work for yourself, the lender may request additional income records. Likewise, a gifted down payment may require supporting documents.

Gather these records early. As a result, you’ll have more time to resolve missing information before making an offer.

Keep Money Aside for Closing Costs

Your down payment is only part of the cash you need. Also, budget for costs that arise during the purchase and closing process.

These may include:

• Legal fees and related expenses
• Ontario land transfer tax
• Inspection or appraisal fees
• Title insurance and property tax adjustments
• Moving expenses and utility setup costs

Check Any Refund Eligibility

Eligible first-time buyers may receive an Ontario land transfer tax refund. However, specific conditions apply.

Therefore, ask your lawyer to confirm your eligibility and estimate the tax payable. Do not assume every first-time buyer qualifies.

Finally, request a closing-cost estimate for your purchase. Keep those funds separate from your down payment budget.