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Buying a home will most likely be the most expensive decision you make in our lives so it shouldn’t be taken lightly. I find it absolutely amazing how some people will spend hundreds of thousands of dollars, possibly even up to a million dollars without giving some serious thought about it. Way too often some of us make a quick emotional decision without considering the steps to purchasing a home.

Who knows what the circumstances are; we might be feeling the pressure from our parents (or partner), there might be a baby on the way, or it might be the adult thing to do. It really doesn’t matter what our reason is for buying a home, but with the price of real estate in Canada these days, we should really think about how becoming a homeowner will affect our finances. Just because we can “afford” the monthly payments, doesn’t necessarily mean we can afford a home.

steps to purchasing a home

Get your down payment ready

If you’re buying a home in Canada, you need a minimum of 5% down to get a mortgage. But if you have less than 20% of the purchase price as a down payment, you’ll need to purchase CMHC mortgage loan insurance which ranges from 1.80% to 3.60% of your mortgage amount. This insurance gets rolled right into your mortgage and is there to protect lenders in case you default.  Obviously, you want to have as big of a down payment as possible so you can avoid additional fees but you also need to factor in closing costs and furniture.

Get your finances in order

Before you apply for a mortgage you need to make sure your credit score is in good order. You want to make sure that there aren’t any errors on your report that may prevent you from getting a loan. Even if your credit score is in good shape, you still need to consider your current outstanding debts. If you have outstanding consumer debts or a car loan, that will greatly affect how much you can borrow.

Create a budget

Some people are quick to argue that owning is cheaper than renting but have you factored in all the costs? Your mortgage, property taxes, and maintenance fees are easy to account for but have you included saving for retirement, vacations, and the possibility of having kids? Remember, lenders don’t care about your personal life, they just look at the “affordability” of your home.

Get pre-approved

Getting a pre-approval isn’t necessary but it definitely will give you peace of mind. Once approved, you’ll know exactly how much you’re able to borrow so you can start looking for homes that fit into your budget. Again, lenders will lend you a ridiculous amount so don’t max out the amount they’re offering you. You shouldn’t take the risk of finding out that you were approved for less than you needed after you’ve purchased your home. There are any number reasons why you get might get declined hence why you should get your finances in order and get a pre-approved mortgage before making a purchase.

Start looking

In Canada Realtor.ca is the main site if you’re looking for properties on sale but you should also check out brokerage websites such as TheRedPin – Kijiji and Craigslist are not places to look for a home. You’ll also want to “hire” your own realtor, don’t just show up at open houses on your own or call the listing agent to set up a showing; having your own realtor will ensure they’re looking out for your best interests. That being said, be sure you interview your realtors; it’s not that hard to get a real estate license so look for someone who does it full time and has experience. Remember, this will most likely be the largest purchase of your life, would you want a part-time realtor taking care of you?

Check all your paperwork

Once you’ve signed the paperwork, be sure to have a real estate lawyer look over all the documents to make sure everything is in order. Lawyers are especially important with new home builds where they could be dozens of pages of legal documentation. Builders aren’t necessarily trying to pull a fast one on you, but you want a professional to review everything so you know exactly what you’re getting.

Final word

Getting things started the right way is simple if you follow the above steps to purchasing a home. Again, this will likely be the largest financial decision of your life so it’s not something you want to rush into. Make sure that you’re ready to be a homeowner and more importantly, only buy something that you can realistically afford.


About Barry Choi

Barry Choi is a Toronto-based personal finance and travel expert who frequently makes media appearances. His blog Money We Have is one of Canada’s most trusted sources when it comes to money and travel. You can find him on Twitter:@barrychoi


  1. Avatar Gary @ Super Saving Tips on April 28, 2016 at 12:48 AM

    That’s a good list of steps. I’d also add to make sure you have well-funded emergency savings. Owning a home comes with all new sorts of emergency expenses and they don’t always wait until you’ve had the home for a while.

    • Avatar Barry Choi on April 28, 2016 at 1:19 AM


      Yes having an emergency fund is vital, anything can happen when you become a homeowner.

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