June 13 2022
If you immigrated or relocated to Canada in the last five years, you are not alone. It is estimated that one out of every five new borrowers in Canada are newcomers or recent immigrants. While the process of applying for a mortgage can feel intimidating, there are several options available to help newcomers make a home purchase.
Who offers mortgages to newcomers in Canada?
There are two main types of lenders newcomers can look to for mortgage: A lenders and B lenders. Those with strong credit scores who have credit history and a consistent source of income can typically qualify with traditional A lenders such as banks, monoline lenders and credit unions. Prospective borrowers who may lack a strong credit score, consistent income or other financial issues are more likely to use B lenders.
How to get a mortgage in Canada as a newcomer
When it comes to applying for a mortgage as a newcomer to Canada, there are several steps to take and factors to consider before you start the process:
It's important that you’re considered a “newcomer” before you even apply for a mortgage as one. Your status as a newcomer refers to the length of time you've been an immigrant, temporary or permanent resident of Canada. To be considered a newcomer, you must have immigrated to Canada within the last five years; anything beyond that time period will not be accepted.
Find a job
Now that you have been granted legal status in Canada and have determined whether you are a permanent or temporary resident, you must secure a work permit for at least three months to demonstrate your ability to make your monthly mortgage payments. Permanent residents must show proof of at least three months of full-time employment. However, self-employed individuals must present proof of employment as well as two years of tax documents.
Build a Canadian credit history and improve your credit score
If you resided in the United States, the United Kingdom or South Africa before moving to Canada, some lenders will still examine your mortgage application even though you don’t have a Canadian credit history. In addition, certain lenders may take into account your foreign credit history in order to have a better picture of your financial status. For other international countries, lenders may request a letter of reference from your previous financial institution.
If you want to improve your credit score and establish your credit history in Canada, read this Homewise article explaining the importance of credit history, scores and how to improve them.
Mortgage programs for newcomers
There are several mortgage programs available to help newcomers including the CMHC's "Newcomers to Canada" program. It provides newcomers financial support and makes the process of getting a mortgage a little easier. In order to be eligible, the home you’re buying must be under $1 million. Your down payment will determine the amount of financial assistance you receive and you must provide the following information when you apply:
Other mortgage programs include:
Get a mortgage pre-approval
We always advise getting pre-approved before applying for a mortgage. This will ensure that you know how much you can afford and will cut down the time you spend looking for a property in different areas. At Homewise, we’ve made the process quick and easy with our 5-minute online application.
Look into your qualification ratios
Your debt-to-income ratio is an important factor that a lender will consider when evaluating your mortgage application. A debt-to-income ratio is used by lenders to establish if you're eligible for a loan and to assess your mortgage affordability. To learn more about debt-to-income ratios, we recommend checking out this Homewise article.
Save for a down payment
The amount of money you have available for a down payment will have a big impact on what you can afford. As a newcomer, you should start saving as soon as possible for your first down payment. New immigrants may be eligible for a mortgage with as low as a 5% down payment.
What documents do you need as a newcomer to Canada to apply for a mortgage?
To compensate for the shortage of banking history, employment history and credit history that newcomers to Canada may lack, lenders will require a large amount of information to help build your mortgage application.
The following is a list of commonly needed documents by lenders.
The exact amount of paperwork required will vary depending on your mortgage program, lender and down payment amount.
Buying a home can be a difficult process, especially if you're new to the country and don't know where to start. It is possible to find the home of your dreams if you can obtain the necessary documents, straighten out your financial situation and seek resources. At Homewise, our goal is to assist future homeowners in finding the best mortgage for their specific needs while ensuring that they are well-prepared and educated throughout the process. Begin the process with us today by applying online in just five minutes, here.
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