How To Get First-Time Mortgages In Canada in 2025: A Step-by-Step Guide
It might take a long time and a lot of effort to apply for a mortgage. However, it may be less stressful if you are aware of the process and understand these things. This detailed guide explains how to get and secure the best mortgage.
Step 1: Understand What a Mortgage Is
You use a loan to buy a house or any expensive purchases. You apply for this loan and agree on terms to repay with interest, usually over 25 years. With time, your payments go to repay the debt, while in the beginning, you pay more interest.
Step 2: Improve Your Credit Score
It is very important to make your credit report error-free and make sure your credit score meets the necessary requirements.
A low credit score means you’ll pay a higher down payment, higher interest rates, or maybe your application could get rejected. Invest some time in raising your credit score.
Step 3: How To Qualify and Secure the Best Mortgage
Firstly, let's just understand why choosing the right mortgage is necessary, then we’ll dive into further details about how to qualify:
Choose the right mortgage:
When you decide to take out a mortgage, it’s a long-term financial decision that might affect your budget. First-time buyers can save thousands of dollars by making the right decision. There are fixed rates and variable rates. A fixed rate offers stability while variable rates fluctuate, so it comes with the risk.
The advice is not to just look for interest rates but also flexibility, prepayment, and hidden costs. Pick the right one that suits your financial needs as well.
How to qualify:
To secure the best mortgage rate, you must be prepared to meet the requirements. Lenders evaluate certain things, such as:
Credit score and improvement: You must make your credit report worthy enough to secure the best deal. If your credit score is less than ideal, then take some time to raise your score or work with a financial consultant or mortgage consult to get the best mortgage rate.
Down Payment: To get the best mortgage rate, especially for first-time home buyers, you need to make a higher down payment, at least 20% payment to save extra expenses.
Savings Plan: Although saving 20% may seem complicated, doing so will lower monthly installments and total loan expenses. To get there more quickly, use budgeting software and savings plans.
Some people have some questions like:
Can you get a first-time homebuyer loan twice?
Yes, but only if you meet certain requirements, you can get a first-time home buyer loan more than once. Programs like the Home Buyers' Plan (HBP) may classify you as a first-time buyer if you haven't owned a property in the previous four years. After that four-year break, you restore your access to benefits like making a down payment with your RRSP.
Step 4: Mortgage Preapproval
Your lender or mortgage advisor will look into your financial situation by reviewing the following documents:
- The identification
- Employment proof
- Security proof that you’re eligible to pay it back
- Your assets
- Your debt
The most important aspect that they’ll look for is your credit history and debt-to-income ratio. Then they will tell you how much you can secure or spend on a home. A pre-approval letter from a lender explains to sellers that your offer is authentic. If you don’t get it you might end up rejected to get a mortgage, but you need to still pay for the house you promised to buy.
After you get pre-approved for a mortgage, certain lenders may lock in your interest rate for a maximum of 120 days. You will still be able to get the rate that was initially given to you, even if rates rise throughout your pre-approval period. You should also be able to renegotiate if rates drop.
Step 5: Select The Best Mortgage Option
After getting pre-approved, your lender will ask you to decide these certain things to finalize your mortgage. You should carefully consider your options and select the one that best meets your needs.
Your lender will explain all the pros and cons of each option that will help you make the best decision.
Term: The duration of your mortgage contract before it needs to be renewed is known as the mortgage term. Terms might be as short as a few months or as long as five years. Your mortgage may have several terms.
Amortization Period: You pay less during longer amortization periods, such as a 30-year mortgage, but you pay more in interest.
Interest Rate: Decide what you wanna get fixed or variable. Variable interest rates may change throughout the course of the mortgage term, but fixed interest rates remain constant.
Payments: This can be weekly or monthly, with a number of quick alternatives available.
Mortgage Type: It can be either open or closed. Open mortgages may offer more flexibility to pay off your mortgage, but usually have higher interest rates, while closed mortgages may have lower interest rates but less payment flexibility.
Step 6: Compare Mortgage Options from different lenders
When you understand all these things and know how much mortgage you need and pay back, it’s time to shop around and compare mortgage options.
You can do it directly or if you’re working with the broker, he can do this work for you and find you the best option that meets your needs. Mortgage brokers are qualified experts make sure you choose the one that has good reviews.
Step 7: Your Mortgage Application
It's time to formalize things when your offer is approved. Your mortgage application will be filled out; your financial situation will be reassessed, and a house assessment will be necessary to verify the property's worth.
If you face any issue, such as the lender rejecting the entire amount, you can:
- Raise your down payment
- Extend the amortization period or bargain over the rate.
- Apply together with a co-signer
After that, schedule a house inspection to look for any undiscovered problems.
Then, submit all necessary paperwork to complete your mortgage. Be prepared to pay for closing expenses, such as taxes and legal fees.
Congratulations once everything has been signed and accepted! Officially, the house is yours.
Disclaimer: This content is based on current facts and intended purely for informational purposes. Always ask your lender about current details.