A Practical Guide to Buying Your First Home in Toronto

Buying your first home is one of life’s most exciting milestones. But let’s be honest – especially in a market like Toronto, being a first time home buyer can also feel incredibly complex and overwhelming.

My name is Simon Browning, and I’m a Mortgage Agent here in the Humber Bay Shores area of Toronto (South Etobicoke). With over 25 years of prior business experience, I’ve built my mortgage practice on one core belief: a successful home-buying journey starts with clarity, not confusion. My commitment is to provide a five-star customer experience by turning a complicated process into a clear, manageable roadmap.

This guide is designed to do just that. We’ll walk through the entire process step-by-step, not as a sales pitch, but as a practical conversation – the kind we’d have over coffee.

Part 1: The Foundation (Before You Even Look at Listings)

Getting your finances organized is the single most important thing you can do to set yourself up for success. Rushing this stage is where buyers make costly mistakes.

Step 1: Understand Your Down Payment

Your down payment is the portion of the home’s purchase price you pay upfront. In Canada, the minimum depends on the price:

Homes under $500,000: Minimum 5% down.
Homes between $500,000 and $1,499,999: 5% on the first $500,000, and 10% on the portion above that.
Homes $1,500,000 or more: Minimum 20% down.

The 20% Threshold: If your down payment is less than 20%, you are generally required to have mortgage default insurance. For properties of $1,500,000 or more, a minimum 20% down payment is mandatory.

Where can it come from? Your down payment can come from several sources, including your personal savings, a First Home Savings Account (FHSA), your RRSP (through the Home Buyers’ Plan), or a gift from an immediate family member.

Step 2: Create a Realistic Household Budget

Your mortgage payment is only one piece of the puzzle. To understand what you can truly afford, you need to see the whole picture. This is why I create a detailed Property Budget for every client. It goes beyond the mortgage and includes:

Property Taxes
Condo Fees if applicable
Utilities (Heat, hydro, water)
Home Insurance

Seeing all these expenses laid out provides a clear, realistic view of your total monthly housing costs.

Step 3: Check Your Credit Score

Your credit score is a key factor lenders use to determine your reliability. A higher score generally means access to better interest rates. You can get a free copy of your credit report from Equifax or TransUnion, and we’ll be accessing it directly through the pre-approval process.

Part 2: Assembling Your Team & Getting Pre-Approved

With a solid financial foundation, you’re ready to take the next step.

Step 4: Get a Meaningful Mortgage Pre-Approval

A pre-approval is a conditional commitment from a lender for a specific mortgage amount. This is the most crucial step before you start house hunting, but it’s critical to understand that not all pre-approvals are created equal.

A standard pre-approval from many lenders has a major limitation: it pre-approves you, the borrower, but it does not pre-approve the property. Often, the bank doesn’t do a detailed review of your file at this stage. This means that even with a pre-approval certificate in hand, the lender could ultimately reject the specific home you want to buy due to factors like a low appraisal or issues with the condo building’s status. It’s a conditional nod that can provide a false sense of security, not a firm commitment.

This is precisely why my approach is different. I get your file “Underwritten Upfront.” This means we collect and review all your financial documents at the very beginning, submitting them for a detailed assessment. The result is a much stronger, more reliable pre-approval that gives you the confidence to make an offer knowing your financing is truly secure.

Step 5: Partner With a Great Real Estate Agent

A great realtor is your guide on the ground. They understand local market dynamics, find properties that fit your budget, and negotiate on your behalf. Your mortgage agent and real estate agent should work together as a seamless team. If you don’t yet have an agent you trust, I can connect you with highly reputable realtors in my professional network who specialize in the Toronto market.

Part 3: The Hunt, The Offer, and The Finish Line

This is where the process becomes very real, very quickly.

Step 6: House Hunting & Making an Offer

When you find the right home, your realtor will help you draft an Offer to Purchase. This legally binding document includes the price, closing date, and any conditions – most commonly, a Financing Condition and a Home Inspection Condition.

Step 7: Finalizing the Mortgage and Closing

Once your offer is accepted, we move quickly.

Submit the Offer to the Lender: We send the offer and property details for final approval.
Appraisal: The lender may require an appraisal to confirm the property’s value.
Hire a Real Estate Lawyer: Your lawyer handles the crucial legal aspects of the sale, from the title search to managing closing funds. It’s vital to have an experienced professional on your side. If you need a recommendation, I can provide a list of trusted real estate lawyers I’ve worked with.
Understand Your Closing Costs: These are one-time expenses due at closing, including legal fees, title insurance, and Land Transfer Tax. My Property Budget worksheet outlines these costs so there are no surprises.

On closing day, the funds are transferred, and you get the keys to your new home.

Part 4: Decoding Your Mortgage

A mortgage is much more than just an interest rate. Getting the details right can save you thousands.

The Interest Rate (Fixed vs. Variable): Fixed offers stability with unchanging payments. Variable fluctuates with the prime rate, offering lower initial rates but less predictability.
The Mortgage Term: The length of your current contract (e.g., 5 years), after which you must renew.
The Amortization Period: The total lifespan of your mortgage (e.g., 25 years). A shorter amortization means higher payments but less interest paid over time.
Prepayment Privileges: This is a critical feature for long-term savings and flexibility. Prepayment privileges allow you to pay down your mortgage faster without incurring a penalty. However, this is a key area where lenders differ significantly.
- Amount: Most lenders allow you to prepay a certain percentage of your original mortgage amount (typically 10-20%) each year. Others offer unlimited prepayment privileges, which is a powerful feature if you are in a position to pay your mortgage down aggressively.
- Frequency: Not only does the amount differ, but so does the frequency. Some lenders only allow a single lump-sum payment per year on the anniversary date. Others are more flexible, allowing monthly top-ups or extra payments anytime you wish. Having a mortgage with generous and flexible prepayment options gives you the power to become debt-free sooner if your income increases or you receive a windfall.
Prepayment Penalties: This is the other side of the coin and one of the most important details to review. A prepayment penalty is a fee a lender charges if you break your mortgage contract (your “term”) early.
Often, people don’t think they will break their mortgage, but life changes. You may want to move for a new job, your family could grow – or shrink – and the current property no longer works. While specific statistics vary, a significant number of Canadians break their mortgage before the term is up.
Depending on the product, this can be very costly. In a recent poll I ran on my Instagram, the highest penalty one homeowner reported paying was nearly $50,000 to break their mortgage. The lowest I’ve personally seen is around $2,000. This is a crucial detail we review together to ensure your mortgage aligns with your life plans, not just your immediate budget.

Part 5: Where to Get Your Mortgage: Your Lending Options

The big banks are only one piece of the puzzle.

The Big Banks: Convenient, but their specialists can only offer you their own products, which may come with restrictive clauses.
Monoline Lenders: They only do mortgages. Their lower overhead often translates into better rates and more flexible terms. They are a primary reason working with a mortgage agent adds significant value.
Credit Unions: Member-owned institutions known for great service and sometimes more flexible, common-sense underwriting.

A Note on Fees: How Your Mortgage Agent is Compensated

A frequent question I hear is, “Do I have to pay you a fee?” It’s a valid question, and the answer is simple: No. For the vast majority of mortgages from ‘A’ lenders (like those above), my services are completely free to you. Instead, the lender we place your mortgage with pays me a commission.

This often leads to the next logical question: “Does that commission mean my rate is higher?”

That’s a fair question, and the answer again is no. The reason comes down to how lenders operate. Think of it like wholesale versus retail pricing. Lenders offer mortgage agents access to their wholesale rates, which are typically lower than the retail rates they offer to the public in their branches. They can do this because agents bring them a high volume of pre-vetted, high-quality mortgage applications. This saves them significant money on the costs of running branches, marketing, and staff salaries needed to acquire a single customer. My commission is paid from those operational savings. The result is that you get the benefit of my expert advice and access to dozens of lenders, often at a rate that is the same or even better than what you could get by walking into the bank yourself. It’s a system designed to be a win-win.

Part 6: Beyond the Basics: Specialty Mortgage Solutions

The market offers tailored solutions for specific situations.

Programs for Professionals (e.g., Medical Doctors): Lenders make exceptions to standard debt rules, looking at your high future earning potential to help you qualify.
Programs for First Responders: Niche products that can include rate discounts or cash-back offers.
The Purchase Plus Improvements Mortgage: Allows you to bundle the cost of a home purchase and immediate renovations into a single mortgage.
Mortgages for the Self-Employed: As someone who has been in business for over 25 years, I have a deep appreciation for the unique challenges entrepreneurs face. These programs use flexible income validation methods.

Part 7: Frequently Asked Questions of First Time Home Buyers

These are the questions that come up time and time again. Let’s tackle them head-on.

I can afford my rent. Why can’t I get a mortgage with the same payment? This is one of the most common and logical questions we hear. The key difference is that lenders don’t just look at the mortgage payment; they use two specific calculations and a mandatory “stress test” to determine what you can afford.

First, there’s the mortgage stress test. You must prove you can afford payments at a higher qualifying interest rate. This rate is typically your contract rate plus 2%, or the Bank of Canada’s benchmark rate (whichever is higher). You don’t actually pay this rate, but it’s used to test your financial stability in case rates rise in the future.

This higher qualifying rate is then used in two calculations:
1. Your Total Housing Costs: Lenders look at your stress-tested mortgage payment PLUS estimated property taxes and heating costs. This total must be below a certain percentage of your gross income.
2. Your Total Debt Load: Lenders then take those total housing costs and add ALL your other monthly debt payments—car loans, student loans, credit card payments, etc. This grand total must also fall below another percentage of your gross income.
This is where other payments have a huge impact. For example, a $700/month car payment doesn’t just reduce your monthly cash flow by $700; it can lower the total mortgage amount you qualify for by more than $100,000 because it uses up a significant portion of your allowable debt limit under the stress test rules.
How much can I actually afford?
The real answer goes beyond a simple online calculator. We determine this by creating a detailed Property Budget (including taxes and condo fees) and then securing an “Underwritten Upfront” pre-approval. This gives you a concrete, reliable number based on your actual finances.
How do I even start the mortgage process?
You’ve already started by reading this. The very first step isn’t looking at houses; it’s getting your financial foundation in order. The roadmap is simple: create a budget, understand your down payment, and then have a conversation with a mortgage professional to get pre-approved.
What are all the hidden costs I don’t know about?
The most significant are Land Transfer Taxes (both provincial and municipal in Toronto) and legal fees. These are one-time closing costs due when you get the keys. My client budget worksheet outlines these clearly so there are absolutely no surprises on closing day.
How much down payment do I need, and is 20% a magic number?
You can buy a home with as little as 5% down (for properties under $1.5M). The 20% figure is important because it’s the threshold to avoid paying for mandatory mortgage default insurance. It’s a great goal, but it’s not a requirement for everyone.
How do I choose the ‘right’ mortgage (fixed vs. variable)?
The “right” mortgage is about more than just the rate. We look at your risk tolerance to decide between the stability of a fixed rate and the potential savings of a variable rate. But just as importantly, we compare prepayment privileges and penalties to ensure the mortgage contract fits your life plans.
Will checking my credit for a mortgage damage my score?
This is a great question. When we pull your credit for a mortgage application, it’s a “hard inquiry,” which can cause a small, temporary dip in your score. However, the credit bureaus know that people shop for rates and treat multiple mortgage-related inquiries within a short window (typically 30-45 days) as a single event to minimize the impact.For a borrower with a strong credit history (scores typically above 700), it is extremely rare for this minor dip to affect your ability to obtain financing. It’s a standard and necessary part of the process that lenders expect to see, and the benefit of knowing exactly what you can afford far outweighs the minimal effect on your score.

Your Partner for the Long Haul

Buying a home is a journey, not a transaction. My goal is to build a trusted relationship that lasts a lifetime. This commitment extends far beyond closing day – it includes annual mortgage check-ins to ensure your mortgage still aligns with your goals , and continuous rate monitoring to identify opportunities for you to save money over the life of your loan. The process may seem complex, but with the right strategy and a clear plan, it’s entirely manageable.

Ready to take the first step with confidence?

Let’s have a no-obligation chat to map out your path to homeownership and build your personalized Property Budget.

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