The Complete Guide to First-Time Home Buyer Mortgages in Canada

Buying your first home is exciting—but navigating the mortgage process can feel overwhelming. Between down payments, government incentives, qualification rules, and lender requirements, there’s a lot to understand before taking the leap.

This complete guide breaks down everything first-time home buyers in Canada need to know to get approved, secure the right mortgage, and buy confidently.

🏡 Who Qualifies as a First-Time Home Buyer in Canada?

You are considered a first-time buyer if:

• You've never owned a home before

• You haven’t lived in a home owned by you or your spouse in the last 4 years

• You’re purchasing a primary residence

Some programs may define this differently, but these are the general rules.

💰 1. Minimum Down Payment Requirements

In Canada, the down payment depends on the home price:

• 5% on the first $500,000

• 10% on the portion between $500,000–$999,999

• 20% on homes $1 million+

If your down payment is under 20%, CMHC mortgage insurance is required.

🧾 2. First-Time Home Buyer Government Programs

Canada offers several financial incentives to help new buyers enter the market.

✔ First Home Savings Account (FHSA)

• Save up to $8,000/year tax-free

• Up to $40,000 lifetime

• Like RRSP + TFSA combined

✔ Home Buyers’ Plan (HBP)

• Withdraw up to $60,000 from RRSP tax-free

• Must repay over 15 years

✔ First-Time Home Buyer Incentive (FTHBI)

• Shared-equity program with the Government of Canada

• Allows 5–10% of the home price toward your down payment
  (2025 updated rules may change availability)

✔ Land Transfer Tax Rebates

Available in:

• Ontario

• Toronto

• British Columbia

• PEI

Can save buyers up to $8,475 depending on province.

📜 3. Mortgage Options for First-Time Buyers

Fixed-Rate Mortgage

Predictable payments for your mortgage term. Best for stability.

Variable-Rate Mortgage

Rate can fluctuate based on the lender’s prime rate. Often lower starting rates.

Insured Mortgage (High-Ratio)

Required when down payment < 20%. Offers lower interest rates due to lower lender risk.

Conventional Mortgage

20%+ down payment, no CMHC insurance required.

First-Time Buyer-Friendly Options

• 30-year amortization (for 20%+ down)

• Cashback mortgages

• Hybrid fixed/variable plans

A mortgage broker can help match you with the right lender and program.

🧮 4. How Much Can You Borrow?

Lenders calculate your mortgage amount using:

✔ Gross Debt Service Ratio (GDS)

Max: 39% of income
Includes mortgage, taxes, heat, and 50% condo fees.

✔ Total Debt Service Ratio (TDS)

Max: 44% of income
Adds car loans, credit cards, student loans, etc.

✔ Mortgage Stress Test

Must qualify at:

• Contract rate + 2%
  or

• The benchmark stress test rate (whichever is higher)

This ensures buyers can afford their mortgage even if rates rise.

🏦 5. Documents You Need for Mortgage Approval

First-time buyers should prepare:

• Government ID

• Recent pay stubs

• Employment letter

• T4s/NOAs

• Bank statements

• Proof of down payment

• Credit report

• Tax returns (if self-employed)

Having these ready speeds up approval by days.

💳 6. Your Credit Score Matters

Your credit score impacts the rate and lenders available:

• 680+ = best mortgage rates

• 620–679 = standard approval

• Below 600 = alternative lending solutions

Improving your credit 3–6 months before applying can dramatically increase your approval amount.

🔍 7. Hidden Costs First-Time Buyers Miss

Beyond the down payment, budget for:

• Land transfer tax

• Legal fees

• Appraisal

• Home inspection

• Title insurance

• Moving expenses

• Adjustments (taxes, utilities)

Plan for 1.5%–4% of the purchase price.

🏠 8. Tips to Become a Strong First-Time Buyer

✔ Get pre-approved before shopping
✔ Keep credit card balances low
✔ Don’t open new credit accounts
✔ Save extra for closing costs
✔ Choose a lender through a broker for better rates
✔ Consider a co-signer if needed
✔ Use FHSA + HBP together for maximum down payment power

🚀 Final Thoughts

Buying your first home in Canada doesn’t have to be overwhelming. With the right preparation, incentives, and mortgage strategy, you can enter the market with confidence and secure the best financing available.

Whether you're looking for the lowest rate, easiest approval, or the best first-time buyer programs, understanding the process is the key to becoming a successful homeowner.