Buying a home usually means taking out a mortgage. That means you borrow money to buy a home, using that home as collateral for the loan. A mortgage is made up of two parts: principal and interest. Principal is the actual amount borrowed. Interest is the lender's fee you are charged for borrowing. You'll have to decide on an amortization period (the length of time it will take to completely pay off the mortgage) and the term, or length of time each mortgage agreement guarantees the interest rate. Before you go to a financial institution or mortgage broker, keep in mind that there are many mortgage options available. Shop around for the best rates and the best terms. Negotiate. Everyone wants your business, but it's up to you to look after your interests. Of course, the key thing to remember is to negotiate a mortgage that fits into your lifestyle, and doesn't take over your life! Your mortgage broker can help guide you through this process and supply you with information. The amount of mortgage you can afford depends on your income, the down payment, current mortgage rates, and the amortization period you choose. Most lenders want borrowers to keep a total-debt-service-to-income ratio of 40 per cent or less, coupled with a housing-cost-to-income ratio of 32 per cent or less. You may be able to purchase a home with no down payment, thanks to CMHC’s Insurance program. First-time home buyers may also be eligible to withdraw up to $20,000 tax-free from an RRSP to use as a down payment. The funds must be repaid within fifteen years. Lenders can provide you with a pre-approved mortgage that shows approximately what mortgage loan you can afford and the rate you will be charged.