How Much House Can I Afford? A First-Time Home Buyer’s Budgeting Guide [2025 Edition]
- Edith Parinas
- Apr 2
- 3 min read
Buying your first home is an exciting milestone—but it comes with one very big question:"How much house can I actually afford?"
Whether you’re just starting to browse or you’re deep in the decision-making phase, understanding your true affordability is the key to a smooth home buying experience.
In this guide, we’ll walk you through how to calculate your home-buying budget, the hidden costs you might not have considered, and tips to make sure you don’t overstretch yourself financially.
Free Resource: Download the First-Time Home Buyer’s Checklist to follow along and track your steps!
Step 1: Know Your Numbers—Income, Debts & Down Payment
Start by understanding your monthly income after taxes, any debts you're carrying (student loans, credit cards, car loans), and how much you’ve saved for a down payment.
Here’s what lenders typically look at:
Gross Debt Service (GDS) Ratio: No more than 35% of your income should go toward housing costs (mortgage, taxes, heating).
Total Debt Service (TDS) Ratio: Your total debts + housing costs should not exceed 40–42% of your gross income.
Down Payment Minimums in Canada (2025):
5% for homes under $500,000
10% for the portion between $500,000 and $1,499,999
20% for homes $1.5M+
Use a mortgage affordability calculator to get an initial estimate. CLICK HERE
Step 2: Calculate All Monthly Housing Costs (Not Just Mortgage)
Many first-time buyers forget that your monthly mortgage payment is only part of the picture.
Here’s what else to include in your monthly budget:
Property taxes
Home insurance
Utility bills (water, hydro, gas)
Condo fees (if applicable)
Maintenance savings (recommended: 1% of home price/year)
💡 Pro Tip: Ask your mortgage broker for a monthly estimate that includes all of the above so you’re not caught off guard.
Step 3: Consider Hidden & One-Time Costs of Buying a Home
Beyond monthly payments, these are some upfront expenses to prepare for:
Expense | Estimated Cost |
Land Transfer Tax (varies by province) | $3,000–$12,000+ |
Home Inspection | $400–$600 |
Appraisal Fees | $300–$500 |
Legal Fees & Disbursements | $1,000–$2,000 |
Title Insurance | $250–$400 |
Moving Costs | $500–$1,500 |
If you're purchasing with less than 20% down, you’ll also pay mortgage default insurance (CMHC insurance), which can be added to your mortgage.
Step 4: Avoid Being House Poor
Just because a lender approves you for a certain amount, doesn’t mean you should max it out.
Ask yourself:
Will you still be able to save, travel, or build an emergency fund?
Are you planning on growing your family or starting a business soon?
💡 Your lifestyle matters. Choose a home that fits your life goals, not just your pre-approval number.
Step 5: Get Pre-Approved Early
Getting pre-approved gives you a realistic price range, builds your confidence, and positions you as a serious buyer when it’s time to make an offer.
You’ll learn:
Your estimated interest rate
What monthly payments look like
Whether fixed or variable is best (especially in this 2025 rate climate)
📥 Need help? Download our Mortgage Readiness Guide: 10 Steps to Get Into the House of Your Dreams — Get it here
Step 6: Work with a Mortgage Broker (Not Just a Bank)
A mortgage broker works for you, not one lender. You’ll get access to:
Multiple lender options
Competitive rates
Personalized guidance for your situation
Plus, brokers help break down your affordability without pushing you to the limit.
Clarity Over Guesswork
When you truly understand how much house you can afford, you’ll feel more empowered, more confident—and far less stressed.
This isn’t just a numbers game. It’s about protecting your peace of mind and your financial future.
Make your next steps clear and simple. Use this interactive guide to prep your documents, estimate your costs, and track your progress.
– Edith Parinas
'The Mortgage Broker ~ The Yogi ~ The Blogger'
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