How to mortgage: Rules for first-time home buyers

You've always been told that being an adult means owning a house you're proud of. So you studied hard at school, got a great job, and saved up to buy your dream home in spite of fluctuations in the real estate market.

Buying a house is not a small feat, and here's some good old guidance from the mortgage broker in Toronto to get you started!

What's the minimum you have to cough up as down payment, you ask?

A down payment takes you one step closer to buying your new home. This amount is deducted from the price of your house, and once approved, your mortgage covers the rest.

The minimum down payment you have to pay is 5% when the house is priced below $500,000.

And of course, if your down payment is below 20% of the price of your home, you'll need to purchase mortgage insurance. Mortgage insurance premiums typically range from 0.6% to 1.5% of your mortgage.

It's always better to give a larger down payment and save on insurance.

And this is what happens if you've been eyeing something grander

According to the new federal rules that came into effect in 2016, houses between $500,000-$1 million require a down payment of 10% (earlier 5%). You can of course pay 5% on the first $500,000; but get ready to pay more for everything above.

Oh and by the way, if you're planning to pay more than 20% of the down payment on your house but you still have bad credit, you need to buy mortgage insurance as well.

What are down payments like after the OFSC changed the mortgage rules?

In October 2017, the OFSC announced new, tighter mortgage rules that became effective in January 2018.

After the OFSC's regulations have come into effect, even uninsured home buyers (that is, those who can afford a down payment of 20% or more) have to undergo a stress test.

Regardless, aim for a spotless mortgage application

Clean up your credit score, house hunt in a neighborhood that fits your budget, and carefully calculate your income to debt ratio to turbocharge your application and be on the fast track to owning that semi, condo or that house you've been eyeing forever.