How much home can I afford, and what does a pre-approval actually promise?

What a pre-approval is, and what it is not

A pre-approval is a lender's letter saying that, on the income, debts, credit and down payment you have shown, it would lend up to a stated amount, often with a rate held for a period. It is conditional on the property (the lender will appraise it), on nothing changing in your finances, and on final underwriting.

It is not a mortgage commitment. Lenders decline pre-approved buyers when the appraisal is low, the condo's status certificate is weak, or the buyer's situation has changed. That is why an offer with a financing condition is still the safer offer. Federally regulated lenders must also qualify you at a stress-test rate above your contract rate; the current rule is on the regulators' sites.

What closing costs look like in Ontario

Beyond the price, an Ontario buyer pays land transfer tax (and a second, municipal tax inside Toronto), legal fees and disbursements, title insurance, and adjustments that reimburse the seller for prepaid property taxes, condominium fees or fuel. New homes carry HST; resale homes generally do not.

If your down payment is under 20 per cent, mortgage default insurance is mandatory: the premium is added to the mortgage, but the Ontario retail sales tax on that premium is paid in cash at closing. Add the home inspection, moving costs and utility deposits. Our closing-cost calculator puts these on one page; the price of our work is a published flat fee.

Down payment, deposit and where the money comes from

The deposit is paid with the offer and held in trust; the down payment is the total cash you bring on closing, and the deposit is credited toward it. Federal rules set minimum down payments in bands by price and cap the price at which insured mortgages are available; check the current bands on the CMHC page.

Lenders and lawyers must trace where the money came from. Keep ninety days of statements, get a signed gift letter for gifted funds, and read the CRA rules before withdrawing from an RRSP under the Home Buyers' Plan or from a First Home Savings Account, because both have timing and repayment rules tied to the purchase.

The first-time buyer programmes, and who counts

Ontario refunds land transfer tax up to a capped amount for first-time buyers who are at least 18, have never owned a home anywhere in the world, whose spouse has not owned one while a spouse, and who move in within nine months. Toronto has its own rebate. Federally, the home buyers' amount is a tax credit, and the Home Buyers' Plan and FHSA help with the down payment.

Each programme defines first-time differently, so qualifying for one does not mean qualifying for all. Our first-time buyer page walks through them; the links to the government pages carry the current figures.

Where a lawyer fits this early

Most buyers meet their lawyer after the offer is accepted. Earlier is better when you are buying pre-construction (the agreement is the builder's, and the review window is short), buying with a relative or friend (how title is held matters for tax, family law and estates), or buying as a newcomer (two tax and prohibition regimes apply). We review agreements before you sign for a published flat fee and explain what each clause does.