If you are even considering buying a home – and you must be, because you’re reading this ‘First Home Buyer Guide’ – then the absolute first thing you need to do is a thorough and realistic review of your finances.

Now let’s look at the key steps:

1) Down payment and other costs: Determine how much money you have saved to buy a home. There is more than just the down payment to consider – don’t forget there are things like adjustments for property tax, legal fees, and a whole set of costs to move from one place to another. Keep in mind, as a first-time homebuyer you can withdraw up to $25,000 to buy yourself a home.

2) CURRENT expenses: What do you spend your money on today? Itemize everything except your rent – include your daily Starbucks Latte, clothes, entertainment, car, gas, savings etc. Where possible, use actual bank and credit card statements and look back over time. Make sure you factor in vacations and saving for retirement.

• Note: Mortgage lenders don’t ask you to do this – they use a formula based on your income, your debts and your home costs to determine what you can afford – but this won’t take into consideration things like vacations or savings or how much you spend on entertainment. Don’t let a lender tell you what you can afford – work it out for yourself; your lifestyle depends on it.

3) Get Pre-Approved: You can start by talking to your bank, but in my experience, my bank has never been able to match the rates and terms of a mortgage broker. It pays to shop around. Once you have found the best rates and terms – then apply for pre-approval – just make sure you tell the lender the amount you are comfortable spending each month for mortgage, taxes, condo fee’s if applicable, and heating. You’ll likely qualify for more, but you will need to give up something in your current expenses if you spend more!

4) Denied: What happens if you are denied. It could be a couple of things – your debt load could be too high or perhaps your credit score is poor. If you are at all unsure whether or not your credit score is low – you can get a copy from either Equifax or TransUnion before you apply and work on mending it first.

The Canada Mortgage and Housing Corporation has a complete guide to Buying a Home in Canada. I’ve gone through the key points – but if you are looking for more information. It is an excellent resource.

Click here to go to Step 2 of the First Time Buyer Guide – Assessing Stability.