10 Steps for Saving for a Home in Canada

More than 2/3 of Canadian households are homeowners. The homeownership rate has been rising steadily since the end of the second world war. For most, a home is more than a financial investment - it is a lifestyle choice. If you're ready to get into the real estate market but not sure if you can afford to do so, here are some tips you need to know.

1. Determine your net worth. Explore if you can financially afford a home and how much you can realisitically spend on it. Net worth = Total assets - Total Liabilities. All of your monthly housing costs should not be more than 32% of your gross monthly income.

2. Your monthly expenses (housing costs, car loans, credit card payments etc.) should not be more than 40% of your gross monthly income.

3. Get pre-approved for a mortgage first. This will guarantee you to have a realistic outlook on what you can afford before venturing out into the housing market.

4. Save for a down payment. This can essentially be the hardest part for first time home buyers. A conventional mortgage will require you to have a down payment of 20% of the purchase price. The larger your down payment the lower your mortgage will be and less you will have to pay long-term in interest. You can buy a home with as little as 5% down.

5. When you put less than 20% down your mortgage is considered high-ratio and therefore you are required to purchase mortgage insurance. This is to protect your lenders in the event you default on the mortgage.

6. The Government offers some great incentives for first time home buyers such as the First-Time Home Buyer's Tax Credit.

7. It is easier for a homeowner to accumulate wealth than renters due to the built-in savings you get when paying off a mortgage and building equity in your home.

8. Remember to set goals for yourself if you are saving for a home. It is much easier to save when you have a plan.

9. Ensure you have a clean credit record by staying up-to-date with your current bills.

10. Most importantly, don't let the emotion of buying a house put you in a bad financial situation. Take your time and do your homework.