First time buyers are the largest single group of home buyers in 
Canada and the majority of them are between the ages of 20 and 35.
Canada and the majority of them are between the ages of 20 and 35.Typically the first thing a home buyer does (and should do) on deciding to buy a home is pay a visit to the bank or mortgage broker to determine how much money they are able to borrow towards the purchase price of a home. Most will base the amount of home they purchase on what they learn is their upper borrowing limit.
There are many other financial considerations that are most often overlooked by buyers but should be given merit in deciding on how much home to purchase. Many of the 209 owners whose properties were forced into power of sale over the last year in my area (based upon data from the Barrie Association of Realtors) would likely still have a home and a clean credit record had they applied the advice I'm offering here:
The biggest mistake many make is purchasing the most home they can get based on what they qualify to borrow. The amount the bank will lend you does not consider unforeseen circumstances like a job loss or a major repair or replacement expense for your home or vehicles as a few examples. If you are paying a mortgage that is the maximum amount you were qualified to borrow it is unlikely you have much money left over to put aside each month. Should you or your partner's income be unavailable for a couple months or longer, you can quickly find yourself in a position of having to borrow more to meet your month to month costs or more than likely find yourself forced to sell and likely take a loss if you haven't had time to build up some equity in your home.
Defaulting on your mortgage and having your lender take over and initiate power of sale proceedings will destroy your credit and ability to borrow for the next seven years. Not a position anyone wants to find themselves in.
Another consideration is if you have a 4 year - typical term on your mortgage and interest rates go up between now and renewal time, those who have borrowed up to their limit could find they no longer qualify for a mortgage on their home at the higher rates.
Though less likely to happen in Canada in the foreseeable future given a relatively stable economy and compulsory insurance on high ratio mortgages, many in the US who borrowed up to and in some cases above the value of their home when lenders were willing, had their homes drop considerably in value below what they owed in recent years. When it came time to renew they were "upside down" on their mortgage and had to come up with the difference out of pocket. Many who couldn't just walked away.
My best advice to first time home buyers for whom purchasing a home presents some economic challenges is to focus your search on homes where monthly carrying costs (mortgage and taxes) are no more than the home could command in rent. Do some research on what town homes, condo's and detached homes within your price range are renting for and limit your home searches to properties that could easily be rented out to cover your costs. Should anything happen to your income stream you then have the option to rent your place out and take less expensive accommodations for a time while you get back on track. Not only can having that option save you from financial ruin it has probably saved many marriages as financial stress is one of the bigger causes of divorce.
It's a fact that the homes most often sought by renters, (town homes and homes with lower level apartments for example) have a history of appreciating in value at a faster rate than larger more expensive homes in times of economic uncertainty.
If you follow this strategy chances are in a few years you will have accumulated both equity in the home and a nest egg that will allow you to step up into the home that more resembles your dream home, possibly without having to sell your first home but instead keeping it as an ongoing investment that will pay you back many times over in years to come.
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