If you’re a newcomer to Canada, buying a home in Canada and navigating its mortgage market can be a complex and overwhelming process. There are two main roadblocks that often stand in their way: a lack of credit and employment history. To make this journey easier, here are some tips to help you secure a mortgage without any additional stress.
1. Explore alternative lenders: Consider lenders beyond traditional banks like credit unions or private lenders. They offer more flexible lending criteria and are more willing to consider your unique financial situation beyond your income and credit score. Alternative lenders can also provide newcomers with access to rates and features you wouldn’t normally find at the big 5 banks.
2. Consider a co-signer: A co-signer with a solid credit history and income can significantly improve your chances of mortgage approval. This individual can be a family member or close friend who agrees to pay back the mortgage in the event that you’re unable to make payments. This is especially helpful if you have not built a credit history in Canada.
3. Build your credit immediately: If you’re new to Canada, it’s important to sign up for credit facilities, such as credit cards or small loans, as soon as possible to begin building your credit history. It’s also worth exploring if your credit history from your home country can be considered in Canada, as some financial institutions will take it into consideration. An unbiased advisor, such as someone from our team at Homewise can provide advice on how credit works and what your options may be based on the country you have immigrated from.
4. Explore eligibility for specialized mortgage programs**:** Newcomers with permanent residency of less than five years or those with a valid work permit are eligible for specialized mortgage programs in Canada. These programs are facilitated through three default mortgage insurers: the Newcomers to Canada Housing program by the Canadian Mortgage and Housing Corporation (CMHC), the Maple Leaf Advantage program by Canada Guaranty, and the New to Canada program by Sagen.
5. Organize your documentation before arrival: It's crucial to have key documents, such as proof of income, tax returns, bank statements, and credit reports, well-organized and easily accessible, as this streamlines the application process and minimizes delays. For newcomers, the process requires additional documentation including your work permit, evidence of your employment status (full-time or part-time with guaranteed hours), and recent bank statements (typically at least three months) to show a consistent income. For those applying under specific newcomer programs, these additional documents showcase your financial stability and readiness for homeownership.
6. Work with a mortgage professional: Find a mortgage expert or professional who is experienced in working with newcomers like our team at Homewise. We can assist you in reading the fine print to understand the intricacies of the mortgage process, as well as help you prepare your application and shop around for the best mortgage tailored to your financial situation.
