We’re so glad you found our handy list of the nine most critical steps before buying your first home in Toronto. We’ve tied all the scary unknowns into a neat little package, so you know exactly what to do before you begin your home search. 

So, take a deep breath and read on to help prepare yourself for one of the most nerve-wracking, exciting decisions of your life! 

1. Get Your Finances in Order

Although most people make the decision to buy a home secure in the fact that they can afford a mortgage, lenders might disagree. Before you do anything, you need to double check you really are ready for a mortgage by getting your finances in order. 

That means doing the following:

• Check your credit score to make sure it’s above 680 to help ensure you qualify for the best mortgage rates
• Make sure your debt-to-income ratio or DIR (your monthly debt payments divided by your gross monthly income) is 43% or less
• Try to get as much debt paid down as possible to improve your DIR if it is higher than 43%
• Make sure you have enough of a down payment:
  • 5% down for homes priced $500,000 or less (not likely in this market)
  • 5% down for the first $500,000, and 10% for the balance for homes priced $500,000 to $999,999 
  • 20% down for homes $1 million or more 
• Looking at your current budget to ensure your income more than covers your current expenses 

Oh, and if you were relying on the first-time homebuyer’s incentive to supplement your down payment, you’ll have to rethink your plans. The Canada Mortgage and Housing Corporation (CMHC) discontinued the program this year (2024).

Read more posts about buying a home right here:

• Why Now is Actually a Good Time to Buy a Home in Toronto
• How to Buy an Affordable Home in Toronto
• Can You Skip Buying a Starter Home in Toronto?

2. Get Mortgage Pre-approval

Mortgage pre-approval is soooooooo important when buying your first home because it helps you understand:

• Whether a lender will be willing to lend you money
• How much they are willing to lend you so you can set a budget 
• Whether that budget will get you the home you desire
• How much you can expect to pay for your monthly mortgage payments 

Getting a pre-approval done ahead of time will also help you avoid disappointment should you want to put in an offer on a home, as a) it gives you negotiating power and b) ensures you don’t find out the hard way you don’t qualify for financing. 

The pre-approval process involves running your numbers based on confirmed details such as your income, how much of a down payment you have, your credit score, outstanding debt, etc. The healthier your finances, the better your interest rate, which is why step #1 is getting your finances in order! 

Now, a lot of first-time buyers think that pre-qualification is the same as pre-approval. However, pre-qualification only verifies your information will qualify for a mortgage. It does not come with the same guarantees as pre-approvals. So, make sure you’re 100% clear on what the lender is offering and get their guarantee in writing stating what funds are available, what interest rate they are guaranteeing and for how long. 

Which brings us to the final reason pre-approval is important:

Pre-approval locks in an interest rate for 90 to 120 days while you search for your home. If interest rates rise, you have the better rate, but if they fall, the lender will honour the lower rate. 

Learn more about getting pre-approved for a mortgage with our guide right here.

3. Prepare to Overcome Common Obstacles for Mortgage Pre-approval

Not to be Debbie Downers, but there are some obstacles that can get in your way for pre-approval, including:  

No credit history

Say you’ve lived at home with your parents to save for your downpayment. You have no bills and no credit cards, which means you don’t actually have a credit history. The thing is, borrowers need a year-long credit history to qualify for a mortgage, unless you’re making a super big down payment. Whether the history is in Canada or your home country, proof of a good credit history is a must. So, while you might think always paying cash is a flex that shows how financially responsible you are, it unfortunately has the opposite effect. 

Solution: If this sounds like you, the easiest thing to do is to apply for a credit card, use it each month instead of cash, and then pay the balance off right away. This will establish your credit history. You can also use things like your cell phone bill to build your credit history as long as you pay it on time every month. 

The stress test

Mortgage lenders need you to pass a stress test that proves you can afford not just the current interest rate, but what is called the “qualifying” interest rate. The qualifying rate is typically 2% higher than the actual rate in your mortgage contract. This can be rough if you’re sitting right on the brink of affording a home.

Solution: Getting your finances in order so you have the highest possible down payment and credit score will ensure you get the lowest interest rate the lender is willing to offer. This will reduce the impact of the 2% addition for the stress test.

Being self-employed

If you’re self-employed, you’re likely to face far more scrutiny when trying to get a mortgage. Although this really isn’t fair, as long as you can prove your income, in most cases you can qualify for the same mortgage options as those who are employed if your credit score and DIR are good. 

Solution: Provide your Notice of Assessments for at least two to three years, to prove you have a steady income. Oh, and bump up that credit score! 

Keep reading these home-buying blogs next:

• New Homes Vs. Resale: Which One Generates Equity Faster?
• Benefits of Buying a Home During a Recession
• When is the Right Time to Buy a Home with a New Partner

4. Understand Government Home Buyer Programs

Although the CMHC cancelled the First Time Homebuyer’s Incentive, there are other programs you should know about:

• The Home Buyers’ Amount: A non-refundable tax credit of up to $1,500.
• GST/HST New Housing Rebates: A rebate for some of the tax you pay when buying a new build home.
• The Home Buyers’ Plan (HBP): Tax free withdrawals of up to $35,000 from your registered retirement savings plan (RRSP) to use towards your down payment.
• The First Home Savings Account (FHSA): Save up to $40,000 tax-free to buy a home with an annual contribution limit of $8,000.
• Ontario Land Transfer Tax Refund: Receive up to $4,000 in refunds for homes priced over $368,000. 
• First-time Home Purchase Rebate (Toronto): A rebate of up to $4,475 if you’re purchasing a new-build or a residential resale property in Toronto.

If you decide you’ll need to move outside the GTA, some Ontario municipalities offer other home buying programs and incentives so it’s worth looking into that. These programs can really add up and help reduce the costs of buying a home. 

5. Create Your Must-Have Dream Home List

Your must-have dream home list is the things you absolutely can’t live without. Be realistic when making your list because while you might think you’d die if you had to live in a house with Formica countertops, you wouldn’t! Must-haves are things like being close to the TTC or Don Valley so you can get to work or having three bedrooms. 

So, what does that must-have dream home list look like? Here’s a typical house hunt checklist:

• Your preferred part of town 
• Your budget
• Best school district
• Home age 
• Type of home 
• Number of storeys 
• Style of home (be prepared to change your mind, there’s so many fun options out there!) 
• Move in ready or fixer upper
• Your commute requirements i.e., no longer than an hour’s drive, using TTC vs. traveling on the GO, etc. 
• Accessibility if applicable 
• Number of bedrooms and bathrooms (remember to up the count if you want designated room for your home office)
• Size of home and lot (if applicable)  
• Air conditioning (some might view this as a Would Like, but we think it’s definitely a must have with Toronto’s humidity. Ugh!) 
• New build or resell 
• Parking  
• In a condo, unit laundry room

Those to-die for, edgy terrazzo countertops fall under Would Like’s. Here are a few more examples: 

• Specific upgrades like a steam walk in shower or second floor laundry room
• Features that allow you to enjoy certain lifestyle preferences such as a chef’s kitchen, space for a gym, or a pool
• Work needs such as a workshop, office built-ins, storage space, etc.
• High tech features like smart home capabilities, app-controlled appliances, or security

Looking for some decor advice? Here are some trends we recommend leaving in the past!

6. Find a Buyer’s Agent

Meeting with a few real estate agents will ensure you find the right fit (like our team!). Avoid anyone who doesn’t ask a lot of questions or doesn’t offer a comprehensive buyer consultation that helps educate you on the process. Those guys are interested in the commission and won’t go the extra mile to find the home of your dreams. They might even steer you in the wrong direction, convincing you to buy a home you don’t love. The worst!

So, what do you want in an agent? Some questions to ask during the screening process to help find the right team for the job include:

• How long have you been a real estate agent?
• What type of experience do you have in my preferred neighbourhoods?
• How successful have you been in finding my specific type of home for your clients?
• How do you deal with multiple offers?
• What is your approach when showing me homes? 
• Is it just you who will show me properties, and what happens if you’re not available for a home I want to see urgently?
• How do you decide what properties I need to see?
• Is this your full-time job?
• Do you have a response time guarantee?
• Can I speak to some of your current and past clients?

You also want your team to offer a satisfaction guarantee in writing that allows you to cancel your representation agreement if they fail to deliver on their service promises. 

Read our 10 Tips for Finding the Best Toronto Real Estate Team for You right here.

7. Book Your Buyer’s Agent Consultation

Consultations help paint a better picture of the market, what your budget will get you and where. We sit down and discuss the costs associated with buying your first home including things like your deposit versus your down payment, home inspection and legal fees, appraisal fees, property taxes, as well as typical home operating costs so you get a clear picture of what you’re in for. We also review the different property types and their current market values so you understand where we should focus our house hunt. 

Although you’ll hopefully have your mortgage pre-approved, we can also help you understand financing options, the elements of an offer and what to expect when completing the sale. We’ll also review your list of Must Have’s and Would Like’s so that we can help you find your dream home that much faster. We will work through the list together and get you on the right track to your first home purchase, reviewing properties and areas online before we head out to tour homes in person. We want to save you the hassle of looking at homes that don’t line up with your dream home checklist. That said, if something really cool comes up and we think you might just love it, we’ll mention it. Why not, right?

Can you buy a home without a real estate agent? Read about the benefits of working with an agent right here.

8. Start Your House Hunt

Now that we understand your criteria we can start screening listings for you. Anything that feels right we will preview in person before suggesting we set up a tour. We’ll be right by your side and walk you through the homes, pointing out the positives AND the negatives so you understand what you’re getting into. 

As we view homes, we’ll use your feedback to fine tune our screening process to get you closer to your dream home. We also provide all the information you need to make informed purchases without trying to sway you to buy something we know isn’t right for you.

Don’t be surprised if you change your mind and want to revise and refine your Must Have list and narrow down your ideal Toronto neighbourhood. This is an important part of the process as you learn more about what’s out there, visit the neighbourhoods and see what your budget will buy. 

What if you decide you want the perfect home, more than you want that trendy area? We can refocus our search based on where you’ll get the most bang for your Loonie. Go ahead, change your mind more than once! No judgement here. Just know we’ll try to keep you focused so you don’t get overwhelmed. If we sense you’re overwhelmed, we’ll suggest a regroup to help get you back on track.

9. Trust Your Gut!

We say, trust your gut because 99.9% of the time you’ll instinctively know you’ve found the right home. It might be something as simple as seeing yourself planting tulips in the front garden, or an emotional feeling imagining hanging your stockings above the fireplace. You’ll also likely overlook things you thought you would never settle on such as a pink tiled bathroom, or a not so gourmet kitchen and find yourself smiling when you envision your Salvadore Dali print hanging above the staircase. 

You also have to be aware of emotions that can influence your decisions in a negative way. We’ve seen it all, from the buyer who overlooks tiny rooms and an awkward layout because they can’t get those new kitchen appliances out of their head to the loft obsessed buyer who refuses to notice that their kitchen required a stooped neck approach to get into the fridge. Whatever is making you scary-facts-blind, we’ll be sure to keep you grounded to avoid emotional decisions you’re sure to regret. 

Read our 10 Signs you’ve found “the one” blog here. 

There’s nothing more satisfying for us than seeing our client’s excitement when we help them find the perfect property. Whether you want a fixer-upper or something turnkey, big or small, in the city centre or in a more family-oriented neighbourhood, we’ll work with you for as long as it takes to find you the best match! We promise. 

Call The Christine Cowern Team at 416.291.7372 or email us at hello@christinecowern.com with any questions or to set up a call. We’d love to work with you!