Home Buying Preparation Guide, What To Do Before You Are Ready To Buy
Thinking about buying a home one day, but not quite ready yet. Perfect. This is the best time to start preparing.
Most mortgage problems do not happen when someone applies. They happen months or years before, because of small habits that quietly affect credit, savings, income, and paperwork.
If you follow the steps below early, your future mortgage approval becomes simple, predictable, and far less stressful.
✅ Credit, Your Silent Approval Factor
Most lenders want to see a credit score of 680 or higher.
What helps your score:
- Keep credit card balances low
- Use your credit regularly and pay it off as you go
- Avoid applying for new credit too often
- Maintain a mix of credit, credit cards, loans, line of credit
- Do not close old accounts, older accounts show longevity and responsible use
What hurts your score:
- Maxed cards
- Missed payments
- Too many credit inquiries close together
- Closing long-standing accounts
💰 Down Payment, What You Really Need
In Canada, the minimum down payment depends on the purchase price of the home.
Homes $500,000 or less
Minimum down payment is 5% of the purchase price
Homes over $500,000 up to $1,500,000
Minimum down payment is:
- 5% on the first $500,000
- 10% on the portion above $500,000
Homes $1,500,000 or more
Minimum down payment is 20% of the purchase price
In addition to your down payment, plan for about 1.5% of the purchase price for closing costs.
Examples
$500,000 purchase
- $25,000 down payment
- ~$7,500 closing costs
$650,000 purchase
- $25,000 on the first $500,000
- $15,000 on the remaining $150,000
- Total down payment $40,000
- ~$9,750 closing costs
If your down payment is less than 20%, mortgage default insurance is required, which is added to your mortgage amount.
Start saving with real numbers in mind.
📄 Down Payment Documentation, Where People Get Stuck
It is not enough to have the money. You must prove where it came from.
Lenders typically require:
- 90 days of bank statements showing the funds in your account
Acceptable sources include:
- Payroll savings
- Personal savings, with proper documentation
- Sale of an asset, car, etc
- Gifted funds from immediate family, with proper paperwork
Avoid moving money between many accounts. Keep your savings simple and traceable.
💼 Income and Employment, Stability Matters
Lenders want steady, verifiable income.
They look for:
- Guaranteed hours
- Stable employment
- Consistency in your line of work
Before changing jobs, reducing hours, or moving to self-employment, speak with a mortgage professional first.
🧾 Taxes, Often Overlooked
- File taxes on time every year
- Keep CRA balances paid or on an active payment plan
- Lenders may require your most recent Notice of Assessment
- Tax debt can reduce how much you qualify for
🏦 Your Banking Habits Matter
Lenders review bank statements carefully.
Avoid:
- NSF charges
- Overdrafts
- Returned payments
A clean, well managed account makes underwriting much easier.
🚗 Avoid New Debt Before Buying
Financing a car, furniture, or large purchase right before buying can reduce how much you qualify for.
Always check before taking on new payments.
💵 Keep Your Savings in One Place
- Use one or two accounts for your down payment
- Avoid transferring money back and forth
- Make the paper trail easy to follow
👨👩👧 Gifted Down Payment Rules
If family is helping:
- Must come from immediate family
- Must be documented properly
- Must be verified
🧠 What Not To Do
- Do not co-sign for anyone
- Do not miss payments
- Do not close credit accounts
- Do not change jobs without checking first
🏠 Start Watching the Market Early
Pay attention to home prices in areas you like. This helps you set realistic savings goals.
📅 When To Get Pre Approved
The ideal time for a pre-approval is 3 to 6 months before you plan to buy.
Too early, things change. Too late, you feel rushed.
The Bottom Line
Preparing early turns a stressful mortgage process into a smooth one. Most buyers wait until they are ready. The smart ones prepare before they are.
If you are planning to buy in the future and want to make sure you are on the right track, reach out any time. A quick check in now can save you months of frustration later.