Canada First-Time Home Buyer's Guide - Programs & Incentives
GENERAL HOME BUYING
1. Should I buy a house or a condo?
It depends on your lifestyle, budget, and maintenance preference. Condos are ideal for low-maintenance living and urban locations, while houses offer more space and privacy but come with more responsibility and cost.
2. How much home can I afford?
Use the 32/40 rule in Canada: housing costs should be under 32% of gross income, total debts under 40%. Online affordability calculators can help, but pre-approval from a lender gives the most accurate amount.
3. What’s the difference between pre-approval and pre-qualification?
Pre-qualification is an estimate based on self-reported info. Pre-approval is a lender’s commitment after reviewing your income, credit, and documents. It makes your offer stronger.
4. How much down payment do I need?
In Canada:
· 5% for homes under $500,000
· 10% for the portion between $500,000–$999,999
· 20% for $1M+
In the US: varies, but typically 3%–20%. Less than 20% usually requires mortgage insurance.
5. Can I buy with no down payment?
Yes, with specific programs like Canada’s First-Time Home Buyer Incentive or VA loans in the US. You can also use gifted funds or RRSPs (Canada).
6. What are closing costs?
These include legal fees, land transfer tax, title insurance, home inspection, appraisal, adjustments, and moving costs. Budget 1.5%–4% of the purchase price.
7. How long does buying a home take?
From offer to keys: 30–90 days. Add extra time for mortgage approval and inspections.
8. Is now a good time to buy?
If your finances and life situation are ready, yes. Don’t try to time the market—focus on long-term goals.
9. Can I buy with bad credit or self-employment?
Yes, but you’ll need to show strong income, have a larger down payment, or go through alternative lenders with higher rates.
10. Are there first-time buyer incentives?
In Canada: RRSP Home Buyers Plan, First-Time Buyer Tax Credit, Land Transfer Tax Rebate, FHSA (First Home Savings Account).
In the US: FHA loans, local down payment assistance programs.
MORTGAGES & FINANCING
11. Fixed vs variable mortgage?
Fixed: same rate for term, stable payments.
Variable: rate changes with the market, can be cheaper but riskier. Choose based on your risk tolerance.
12. Bank or mortgage broker?
Banks offer limited products. Brokers shop around with many lenders to get better rates or flexible terms.
13. What’s mortgage insurance (CMHC/PMI)?
It protects the lender if you default. Required if your down payment is under 20%. You pay it as a lump sum or monthly.
14. What’s the max amortization period?
Canada: 25 years (insured), up to 30 (conventional).
US: typically 30 years.
15. How do I get the best mortgage rate?
Improve your credit score, lower debts, shop around, and compare fixed vs variable offers. Brokers often get better rates than banks.
16. What’s a mortgage stress test?
In Canada, you must qualify at a higher rate (currently ~5.25%) to prove you can handle rate hikes.
17. What if I break my mortgage early?
You pay a penalty—usually 3 months’ interest or interest rate differential (IRD). Check with your lender before making changes.
18. How can I lower my monthly payments?
Increase down payment, extend amortization, or opt for a lower rate. Some use cashback mortgage offers to reduce upfront costs.
19. Can I use RRSP or 401(k) to buy a home?
Canada: Yes, under the RRSP Home Buyers’ Plan (up to $60,000).
US: 401(k) withdrawals may be possible, but tax penalties may apply unless using for first home under IRA rules.
20. What if interest rates rise after I buy?
If you have a fixed mortgage, you’re protected until renewal. Variable rate holders will see payments rise or amortization extend.
CONDO-SPECIFIC QUESTIONS
21. What’s included in condo fees?
Usually: building insurance, maintenance, snow removal, landscaping, amenities, reserve fund contributions. Utilities may be included.
22. Who manages a condo?
A condo board (volunteer owners) and a property management company handle operations, rules, maintenance, and finances.
23. Can I renovate my condo unit?
You can, but you must follow building rules and may need board approval, especially for structural or plumbing changes.
24. What is a condo status certificate?
It outlines the building’s financial health, reserve fund, upcoming repairs, rules, and any legal issues. Always review it before buying.
25. Risks of pre-construction condos?
Delays, price changes, cancelled projects, and unknown quality. However, they offer newer features and deposit plans.
26. Do condos appreciate?
Yes, but usually slower than detached homes. Location, amenities, and management quality affect value.
27. What is a special assessment?
An extra fee charged to owners when unexpected repairs arise and the reserve fund is insufficient.
28. What is a condo reserve fund?
A fund for major future repairs (e.g. roof, elevators). Healthy funds reduce the risk of special assessments.
29. Condo vs apartment?
A condo is privately owned; an apartment is typically rented from a landlord or corporation.
30. Can I rent out my condo?
Yes, unless restricted by the condo bylaws. Always check for short-term (Airbnb) or long-term rental rules.
LOCATION & NEIGHBOURHOOD
31. How do I choose a neighborhood?
Research schools, crime rates, walkability, transit, future development, and community vibe. Visit at different times of day.
32. What should I look for during a visit?
Noise, traffic, cleanliness, neighbors, parking, and distance to amenities. Talk to locals if possible.
33. What is Walk Score?
A measure of walkability. Higher scores = more access to daily needs without a car.
34. What about high-crime or flood zones?
Check local crime maps. Flood zones may require costly insurance and can affect resale value.
35. How close should I be to work or transit?
Ideally under 45 minutes commute. Proximity to transit increases resale value.
AGENTS & BUYING PROCESS
36. Do I need a real estate agent?
Yes, especially as a first-time buyer. They guide the process, negotiate, and access listings. The seller usually pays their commission.
37. Does the buyer pay the agent?
In most cases, no. The seller pays both the listing and buying agent.
38. How do I choose an agent?
Ask for referrals, check reviews, meet 2–3 agents, and ask about experience, neighbourhood knowledge, and communication style.
39. Can I buy directly from the listing agent?
Yes, but there’s a conflict of interest. It’s best to have your own agent representing you.
40. Can I avoid bidding wars?
Yes—by targeting less competitive areas, shopping in off-seasons, and using strong financing and offer terms.
DUE DILIGENCE
41. Do I need a home inspection?
Yes, unless you’re an expert. It can save you from costly surprises and give leverage in price negotiations.
42. Red flags during showings?
Musty smells (mold), water stains, foundation cracks, old wiring, DIY renovations, and unfinished basements.
43. Mold, asbestos, wiring issues?
All are expensive and dangerous. Get professional quotes and consider walking away or renegotiating price.
44. Can I cancel after inspection?
If your offer was conditional on inspection, yes. Otherwise, it may cost you your deposit.
45. How to check if a home is overpriced?
Compare with recent sales of similar homes, check listing history, and get advice from your agent.
RENTING VS BUYING
46. Is it better to rent or buy?
If you plan to stay 3+ years, buying builds equity. Renting offers flexibility. Use rent-vs-buy calculators.
47. What’s the breakeven point?
Typically 3–5 years. It varies by city, interest rates, and rent prices.
48. Can I rent and still buy later?
Yes—build savings, improve credit, and research while renting. Renting is not wasted if you plan ahead.
49. What is rent-to-own?
You rent the home with an option to buy later. Part of rent may go toward the purchase. Be cautious and get legal review.
50. Should I buy if I may move soon?
No. You may lose money on closing costs and market shifts. Renting may be smarter short-term.
CLOSING & MOVING
51. What happens on closing day?
You sign legal documents, your lawyer transfers funds, the title is registered, and you get your keys.
52. Can the seller back out?
Only if conditions are not met or the buyer defaults. Otherwise, they can be sued.
53. Do I need a lawyer?
Yes. In Canada, lawyers handle the title transfer. In the US, some states use title companies.
54. What do I sign at closing?
Mortgage agreement, deed, statement of adjustments, tax documents, and legal disclosures.
55. When do I get the keys?
Usually by 5 p.m. on closing day, once funds are confirmed and registered.
INVESTMENT & LONG-TERM QUESTIONS
56. Is real estate a good investment?
Yes, long term. It builds equity and offers leverage. But it has costs, risks, and requires maintenance.
57. Should I buy to rent out later?
Yes—if the property cash flows or you plan to move. Be sure to check landlord regulations.
58. How do I increase my home’s value?
Upgrade kitchens, bathrooms, paint, lighting, curb appeal, and storage. Don’t over-renovate for the area.
59. How do I use home equity?
Via HELOCs (Home Equity Line of Credit), refinancing, or second mortgages to fund renovations or invest.
60. How do I avoid losing money later?
Buy in good locations, don’t overpay, maintain the property, and sell at the right time.