So, you've saved over the years for a down payment on your home, and you're eager to take the plunge. This is a critical first step, but it's also important to exercise caution and survey all the costs involved. This is, after all, quite likely the most important financial decision you will ever make, so do it carefully.

A good way to start is to pay a visit to your financial planner, your banker or a mortgage broker, just to get a good idea of your full financial landscape - everything from an assessment of your assets and liabilities, to your savings, credit rating and everything in between. This will give you a good idea of your net worth and just how much home you can afford. This is also where, if you haven't already, you will soon learn the importance of your credit rating, also known as your credit report. This is a detailed collection of your entire borrowing and repayment history, used by lending institutions to assess your credit-worthiness. Like it or not, many places consider your credit rating a good indicator of your character. The report contains details on any previous loans, payment history, where you've lived and worked, whether you have been sued and if you have declared bankruptcy in the last seven years.

You have a legal right to access this information - not just to see where you stand, but also to correct any errors. And errors do occur, but many people discover them when it's too late - such as when they go to buy a home. How much can you afford? Once you get a clear understanding of your financial situation, you can figure out what you can afford in monthly housing payments.

Generally speaking, lenders follow two affordability rules to determine how much you can pay:

The first is that your monthly housing costs shouldn't exceed 32 per cent of your gross household monthly income - your Gross Debt Service ratio. These costs include monthly mortgage principal and interest, taxes and heating expenses. If you're buying a condo, half of the monthly condominium fees are factored into the equation.

The second affordability rule is that your entire monthly debt load - including housing costs, car loans and credit card payments - shouldn't exceed 40 per cent of your gross monthly income. Lenders total these debts to determine the representative percentage of your gross household monthly income, which is known as Total Debt Service ratio. Another cost you may hear about during your home search is the harmonized sales tax, a levy that in Ontario combines the eight-per-cent PST and five-per-cent GST, and in BC the five-per-cent GST and seven-per-cent PST, as of July 1, 2010. How the HST will impact your home purchase depends on whether you buy new or used property. Estimates are that it will add about $2,000 to the cost of buying a resale home, since the tax will be applied on items such as real estate agent commissions, lawyer's fees, home inspections and appraisals.

For new homes priced under $400,000, buyers can get a 75-per-cent tax rebate which, combined with input tax credits, means you will pay no more tax than under the previous structure. For new homes priced at more than $400,000, HST will be charged only on the amount above that threshold.