During the pandemic, home prices reached record highs, and competition for homes was intense. Buyers felt pressure to make clean offers with no conditions so their bids would stand out.

In 2026, the market is very different — and the conditional offer is back.

This is good news for buyers, as it gives them greater leverage and negotiating power. For sellers, the situation is more complex. Navigating a conditional offer can involve additional costs, extra steps, and the risk that the deal could fall through.

The Shift to a Balanced Market

Real estate experts are referring to 2026 as a “rebalancing year,” when the market is expected to shift toward buyers.

This shift is being driven by:

• More stable interest rates

• Increased housing inventory across the country

Prices in many centres remain high, but with competition slowing, the risk of bidding wars has decreased. Homeowners can still expect steady long-term value growth — just not the double-digit increases seen five years ago.

What Is a Conditional Offer?

A conditional offer is a tentative agreement to purchase a home. The sale only becomes final if specific conditions are met before the closing date.

Common Conditions Include:

Financing Condition

A financing condition gives buyers time to secure financing. Even with a pre-approval, lenders still need to:

• Appraise the property

• Verify income

• Complete final credit checks

If financing falls through, the buyer can walk away without penalty.

Home Inspection Condition

This condition allows the buyer to identify major issues before the sale is finalized.

It can be used to:

• Renegotiate the price

• Request repairs

• Walk away if significant concerns are uncovered

In hot markets, buyers often waive inspections to stay competitive — but this can lead to costly surprises later.

Sale of Current Home Condition

This protects buyers from carrying two mortgages at once.

It:

• Reduces financial risk

• Removes pressure to sell quickly

• Prevents accepting a lower-than-ideal price just to close

Title Search Condition

A title search ensures the property’s legal title is clear of:

• Liens

• Legal claims

• Ownership disputes

This condition confirms the seller has the legal right to sell the property.

Condo Document Review

For condo purchases, buyers should review the condo corporation’s documents, including:

• Financial statements

• Meeting minutes

• Bylaws

These documents may reveal:

• Upcoming special assessments

• Maintenance issues

• Internal conflicts within the condo board

Why Conditional Offers Benefit Buyers

Making Informed Decisions

Without conditions, buyers commit to a major asset with limited investigation. That can work out — or it can lead to unexpected six-figure repair costs down the line.

Protection if Financing Falls Through

A financing condition prevents buyers from being forced into high-risk or predatory lending options if funding is denied.

Peace of Mind

Conditions give buyers time and space to make rational, confident decisions — not rushed ones driven by pressure or fear of missing out.

Increased Negotiating Power

When a deal is conditional, sellers may be more open to:

• Price reductions

• Repairs

• Flexible closing timelines

How to Use Conditions Strategically

The return of conditional offers doesn’t mean you should overload your offer with them.

Keep Conditions Reasonable

Sellers are more likely to accept offers with:

• Realistic timelines

• Necessary (not excessive) conditions

Have your inspector and lender lined up to keep things moving efficiently.

Work With a Reputable Real Estate Agent

An experienced agent will help structure an offer that:

• Protects you

• Still has a strong chance of acceptance

• Aligns with local market norms

Keep the Conditions That Matter to You

Even in a balanced market, buyers may feel pressure to waive protections. If a condition feels important — especially for first-time buyers — include it.

Removing Conditions

Once all conditions are satisfied, they are removed and the deal becomes binding.

Before doing so, review:

• Inspection reports

• Title search results

• Appraisal

• Financing documents

If something isn’t clear, consult your real estate agent or a real estate lawyer.

If a condition is not met, the buyer can walk away, and the deposit is returned.

Final Thought

Conditions exist to protect buyers from making risky financial decisions. It’s easy to lose sight of that when you’re excited about a home.

Remember:
You’re not just buying a place to live — you’re investing in a major asset.

Thinking about buying or selling in today’s market?
Let’s discuss your options and develop an offer strategy that protects you.

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Buying a home is likely the largest financial commitment you will ever make. Before browsing listings and attending open houses, it is important to understand how much house you can realistically afford. This helps you focus your search, negotiate confidently, and avoid stretching your finances too thin.

Key Takeaways

• Understanding the 32% Gross Debt Service (GDS) and 40% Total Debt Service (TDS) ratios helps determine affordability.

• The true cost of homeownership extends far beyond the mortgage payment.

• Income, debt levels, credit score, and interest rates all affect affordability.

• Mortgage types and terms directly impact your housing budget.

• Creating a realistic budget helps prevent becoming house poor.

The Costs of Homeownership

Down Payment

Your down payment is your initial investment when purchasing a home.

Minimum down payment requirements in Canada:

• Homes under $500,000: minimum 5%

• Homes between $500,000 and $999,999:

  • 5% on the first $500,000

  • 10% on the remainder

• Homes $1 million or more: minimum 20%

A larger down payment reduces your mortgage amount, may improve your interest rate, and lowers mortgage insurance costs. If your down payment is under 20%, mortgage default insurance is required and added to your mortgage.

Mortgage

Your mortgage payment typically includes principal and interest. The amount depends on:

• Loan amount

• Interest rate

• Amortization period

• Payment frequency

If you choose a variable rate or when a fixed term expires, your payments may increase. Building a buffer into your budget is recommended.

Property Taxes

Property taxes fund municipal services and are based on assessed value and local tax rates.

• Rates vary across Canada, generally between 0.5% and 1.5% annually.

• Some lenders collect property taxes with your mortgage payment.

• If not included, you must budget separately.

Home Insurance

Home insurance is usually required by lenders and protects:

• The structure of the home

• Personal belongings

• Liability coverage

• Temporary living expenses if repairs are needed

Costs vary based on location, home value, construction, and coverage level.

Maintenance

A common guideline is to budget 1 to 3 percent of the home’s value annually.

Maintenance costs can include:

• Roof replacement

• Furnace or HVAC repairs

• Plumbing or electrical work

• Foundation repairs

Newer homes often require less early maintenance, while older homes may require more immediate repairs.

Utilities and Services

Monthly utilities may include:

• Electricity

• Heating

• Water and sewage

Additional costs can include:

• Internet and phone

• Garbage and recycling

• Security systems

• Lawn care and snow removal

These expenses can add hundreds of dollars per month.

Extra Fees

If purchasing a condo or property with a homeowners association:

• Condo fees typically range from $0.50 to $1.00 per square foot monthly

• Fees often cover insurance, maintenance, shared utilities, and reserve funds

• Fees can increase over time, especially in older buildings

The Basics of Housing Affordability

The 32% Gross Debt Service Rule

The GDS ratio measures housing costs as a percentage of gross income.

Maximum guideline: 32% of gross income

Housing costs include:

• Mortgage principal and interest

• Property taxes

• Heating costs

• 50% of condo fees (if applicable)

The 40% Total Debt Service Rule

The TDS ratio includes all debt obligations.

Maximum guideline: 40% of gross income

Includes:

• Housing costs from GDS

• Credit cards

• Car loans or leases

• Student loans

• Lines of credit

• Other debts

How Lenders Calculate Your Housing Budget

Lenders assess more than just debt ratios, including:

• Income verification
  Pay stubs, employment letters, tax returns. Self-employed borrowers require additional documentation.

• Credit history
  Most lenders require a minimum credit score around 680 for conventional mortgages.

• Down payment source
  Must come from savings, investments, or eligible gifts.

• Property assessment
  The home must appraise at or above the purchase price.

What You Qualify for vs What You Can Afford

Mortgage approval does not equal financial comfort.

Being house poor can lead to:

• Limited savings

• Increased stress

• Difficulty handling unexpected expenses

• Reduced lifestyle flexibility

Keeping housing costs below lender maximums provides greater financial stability and freedom.

Key Factors Affecting Your Home Buying Budget

Income

Lenders may consider:

• Salary or hourly wages

• Bonuses or commissions

• Investment or rental income

• Other reliable income sources

Variable or self-employed income is often averaged over two years.

Down Payment

A larger down payment:

• Lowers monthly payments

• Reduces interest costs

• Eliminates mortgage insurance at 20%

• May improve interest rates

Debt

Existing debt reduces affordability through the TDS ratio.

Paying down high-interest debt before buying often improves borrowing capacity.

Credit Score

Higher credit scores:

• Improve mortgage options

• Lower interest rates

• Increase affordability

Canadian credit scores typically range from 300 to 900.

Interest Rates

Interest rates affect:

• Maximum mortgage qualification

• Monthly payments

• Total interest paid

• Mortgage stress test qualification

Borrowers must qualify at either the benchmark rate or contract rate plus 2%, whichever is higher.

How to Calculate Your Home Affordability

1. Calculate total gross annual household income.

2. Multiply income by 32% to determine maximum annual housing costs.

3. Divide by 12 for monthly housing costs.

4. Subtract estimated property taxes, heating, and condo fees.

5. Use a mortgage calculator with current rates to determine loan amount.

6. Add your down payment to determine total purchase budget.

7. Confirm total debt payments do not exceed 40% of gross income.

8. Adjust based on comfort level and financial goals.

How Mortgage Type Affects Affordability

Fixed Rate vs Variable Rate

Fixed Rate:

• Stable payments

• Protection from rate increases

• Typically higher initial rates

Variable Rate:

• Lower starting rates

• Payments fluctuate with prime rate

• Higher uncertainty

Mortgage Term

• Terms range from 6 months to 10 years

• Shorter terms often have lower rates but more frequent renewals

• Longer terms offer stability but higher rates

Amortization Period

• Insured mortgages: maximum 30 years

• Longer amortization lowers monthly payments

• Increases total interest paid

• Slows equity growth

How to Budget for a House

• Track current monthly spending

• List all housing-related expenses

• Add a 10% buffer for unexpected costs

• Compare housing costs to after-tax income

• Create savings for repairs and maintenance

• Factor in commuting and lifestyle changes

• Test-drive the budget before buying

• Adjust during the first year of ownership

FAQs About Home Affordability

How Much House Can I Afford Based on My Salary?

A common guideline is 4 to 5 times household income with a 20% down payment and minimal debt. Use GDS and TDS ratios for accuracy.

What Is the 30% Rule?

The 30% rule suggests limiting housing costs to 30% of gross income. It is a starting point, not a universal rule.

How Does My Credit Score Affect Affordability?

Your credit score impacts mortgage approval, interest rates, and available lenders.

How Much House Payment Can I Afford Each Month?

Apply the 32% GDS rule, then subtract taxes, heating, and condo fees to determine your mortgage payment limit.

What Debt-to-Income Ratio Do I Need?

• GDS: 32% or lower

• TDS: 40% or lower

These are based on gross income.

How Much Should I Save Before Buying?

In addition to the down payment, save 1.5% to 4% of the purchase price for closing costs and maintain a 3 to 6 month emergency fund.

Should I Pay Off Debt Before Buying?

Paying down high-interest debt improves affordability and cash flow. Low-interest debt may be manageable alongside a mortgage.

How Do Interest Rates Affect My Budget?

Each 1% increase in rates can reduce buying power by approximately 10%.

Options include:

• Increasing down payment

• Buying a less expensive home

• Choosing variable rates carefully

• Adjusting amortization

How Much Do I Need for a Down Payment?

• Up to $500,000: 5%

• $500,000 to $999,999: 5% on first $500,000, 10% on remainder

• $1 million or more: 20%

Online calculators only tell part of the story. For a one-on-one affordability review tailored to your financial goals

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