New to Canada!
🕛 7 minute read
Canada has seen a surge in international migration over the last few years. With all these new faces wanting to plant roots in this great country’s cities and towns, I wanted to touch base on some of the details surrounding mortgages and how new immigrants can qualify to be homeowners!
Buying a house is an exciting step for anyone, but it is especially so for individuals who are new to the country. As daunting as it may seem, purchasing a home is completely possible with a little knowledge and preparation.
If you are new to Canada and looking to get a mortgage, get in touch with me to learn about the options that best suit you!
If you are already a Permanent Resident (PR) or have received confirmation of PR Status, you are eligible for a typical mortgage with a 5% down payment – assuming you have good credit.
Some additional criteria for qualifying include:
- Must have immigrated or relocated to Canada within the last 60 months
- Must have a valid work permit or obtained permanent residency
- All debts held outside of the country must be included in the Total Debt Servicing Ratio (GDS/TDS)
- Rental income earned outside of Canada is excluded from the GDS/TDS calculation
- Guarantors are not permitted
- Owner-occupied properties if putting less than 20% down payment
Limited Credit or Not Yet Permanent Resident
For Permanent Residents with limited credit, or individuals who have not yet qualified for Permanent Residency, there are still options! In fact, there are several ‘New to Canada’ mortgage programs through CMHC, Sagen™ and Canada Guaranty Mortgage Insurance, which cater to this group of homebuyers.
New to Canada Programs
To qualify for these New to Canada programs, you must have immigrated or relocated to Canada within the last 60 months and have had a minimum of three months full-time employment in Canada.
For individuals looking to borrow 90% of the purchase price, a letter of reference from a recognized financial institution OR six (6) months of bank statements from a primary account will be required.
If you are looking to borrow 90.01% to 95%, you will need to produce an international credit report (Equifax or TransUnion) demonstrating a strong credit profile OR two alternative sources of credit demonstrating timely payments (no arrears) for the past 12 months. The alternative sources must include rental payment history and another alternative, such as hydro/utilities, telephone, cable, cell phone or auto insurance.
Another option for New to Canada residents, depending on your residency status and credit history, is alternative lenders such as B-Lenders and MICs (Mortgage Investment Corporation). It is important to note that alternative lenders will require a minimum down payment of 20%.
Alternative lenders cater to individuals either lacking a strong credit history or a guaranteed income (e.g., recent immigrants or the self-employed). As a result, these lenders generally have lower entry qualifications, which are offset by additional fees and higher interest rates.
Why Is Alternative Lending Necessary?
- CRA arrears
- Income issues such as non-traditional income as with self-employed borrowers
- Credit issues such as low credit score, credit arrears, current mortgage or even bankruptcies
- Unexpected liens on title
- Foreclosure situations
- Unique financing needs/opportunities
If you do not qualify for the New to Canada programs or a standard mortgage, contact me and I can help you navigate your alternative options!
Before Submitting Your Mortgage Application
I will help to ensure you understand your options as well as help you determine the best program and mortgage choice for you. Before we get started, there are a few things you need to know when it comes to submitting an application – and getting approved – for your first mortgage in Canada:
If you’re new to the country and have weak credit, supporting documents will come in handy. These may include: proof of income, proof of 12 months’ rental payments or a letter from your landlord, documented savings, bank statements and/or letter of reference from a recognized financial institution. These documents all paint the picture of whether or not you are a safe investment for a lender.
Build your Credit Rating!
This is one of the most important aspects to getting a mortgage, as credit rating determines your reliability as a borrower and will determine your down payment rate. One of the best ways to build your credit is by getting a credit card that you use and pay off each month. Paying other bills such as utilities, cell phones and rent can also contribute to your credit score and reliability.
One of the most expensive aspects of home ownership is the down payment, which is an upfront cost and one that is vital to securing your future. As mentioned, the down payment can be as little as 5% to 10% depending on your status. However, if you’re paying more than $500,000 for your home, the minimum down payment will be 5% for the first $500,000 and 10% of any amount over $500,000 – $999,999 regardless of your residency status. A minimum of 20% of the purchase price is required for your down payment on purchases that are $1Mil or greater.
Once you are ready to secure your mortgage or if you have any questions, feel free to contact me! I’d be happy to help you determine the best mortgage solution to suit your needs.