New to Canada? Here’s How You Can Get a Mortgage

Starting your new life in a new country is very challenging. Some Canadian banks and lenders offer ways for new immigrants to obtain a mortgage and get into a home of their own. But even newcomer mortgages have specific guidelines and requirements that you must meet before anyone will approve you.

Read on to learn what a new immigrant mortgage is, how it works, what the requirements are, who offers them, and what you can do to improve your chances of getting approved.

What is a New Immigrant Mortgage?

Most people need to borrow money to buy a house. Some banks and lenders offer a special newcomer mortgage program designed to help new immigrants who don’t meet the requirements for a regular mortgage.

There are two main reasons why newcomers fail to qualify for a regular mortgage:

• No Canadian work history: Work history proves you have a stable income. Therefore, banks require at least two years of employment in Canada before considering you for a mortgage.
• No Canadian credit history: Banks like to see an established credit history to prove financial responsibility. They want to know how you handle your debt, including any missed or late payments, credit card balances, and limits.

New immigrants to Canada who don’t have a suitable work or credit history can still get a mortgage as long as they meet eligibility requirements for the newcomer mortgage and certain criteria for newcomer status.

Meeting the Requirements for a Newcomer’s Mortgage

Before getting a newcomer’s mortgage, you must meet the requirements set by mortgage insurers. In Canada, mortgage default insurance is available for newcomer mortgages through the Canadian Mortgage and Housing Corporation (CMHC), Canada Guaranty, or Sagen. Their requirements include:

• Legal status: You must be a landed immigrant or permanent resident in Canada or have temporary status with a work permit.
• Five years or less: To have newcomer status, you must be new to Canada within the last five years. Anything over five years disqualifies you as a new immigrant.
• Meet qualifying ratios: Banks and lenders want to know how much of your income goes toward debt by examining your debt service ratio. Your gross debt service ratio (GDS) should be 39% or less, and your total debt service ratio (TDS) must be 44% or less. Foreign debt is part of the GDS and TDS calculations, but they won’t consider any foreign rental income.
• Full time Canadian employment for a minimum of three months: Applying for a regular mortgage requires at least two years of employment history. However, applying for a newcomer mortgage requires only three months. The only way around the three months of Canadian work history is if your current employer is relocating you to Canada.
• Minimum 5% down payment: A home under $500,000 requires a minimum down payment of 5%. Your lender may want this money to come from your own savings and resources rather than being borrowed or gifted to show competency. If you don’t qualify for mortgage insurance, the down payment rises to 20% or even higher to 35% if you don’t have a qualifying Canadian credit history.

After meeting these requirements, you can move on to choosing your mortgage lender. Regardless of using a small local lender, a major Canadian bank, or a mortgage broker to secure your newcomer mortgage, you want to shop around for the best rates before committing.

4 Steps to Securing Your Newcomer’s Mortgage

Knowing how to secure your newcomer mortgage allows you time to prepare and improve your chances of getting approved. You can start the process whether you’re already in Canada or even if you haven’t arrived yet.

Follow these steps to secure your newcomer’s mortgage:

Step #1: Figure Out What You Can Afford

Knowing how much you can afford makes the home-buying process easier. You won’t waste any time looking at homes beyond your budget, and it helps to have spending criteria when mapping out showings with your realtor. And just because you can afford to spend more on a home doesn’t mean you have to. Calculate what you can afford using an online mortgage calculator. This will give you a rough guideline to follow, and you’ll know ahead of time how much you’ll need for your down payment.

Step #2: Build Your Credit History in Canada

Establishing your Canadian credit history and building your credit score before applying for your mortgage is crucial. There are several ways to achieve this:

• Pay your cable or phone bills on time
• Apply for credit cards specially designed for newcomers with no credit history
• If you’re paying rent, never miss or default on payments

Step #3: Get Pre-Approved for a Mortgage

Getting pre-approved for a mortgage tells you exactly how much you can borrow. Knowing your maximum mortgage amount, rates, and monthly payment helps narrow your search when it comes time to look at houses. Being pre-approved also helps sellers take you more seriously when you put your offer in.

Step #4: Partner With a Trusted Realtor

After you have your finances in place, you can start looking for a local realtor. Partnering with a trusted real estate agent helps make the home buying process easier. Your realtor should listen to your needs, then help you find your dream home within that criteria. Once you find a home, they’ll walk you through the process of putting in your offer and closing the deal.

Have Questions About the Newcomer Mortgage in Canada?

You’re starting a new life miles away from what you call “home”. You have enough to worry about with starting over, so let’s make this transition as smooth as possible.

My name is Joel Cooper. I’ve helped countless Canadians find their dream home in Toronto and the GTA. Whether you’re new to Canada, looking to move here, or a longtime resident, I’m here to support you through your home-buying journey.

Reach out today