Arriving in a new country is an exciting time, but it can also come with many challenges. New immigrants in Canada may struggle with language barriers, adjusting to the food, finding suitable employment, understanding the financial system, securing housing, and more.
If you’re new to Canada and you’re looking for housing, you may find it difficult to navigate our local real estate market. It can be challenging to decide whether you want to rent or buy and you may not know how to best select a house that fits your budget. If you do decide to buy, it can be even more challenging to understand how to apply for a mortgage.
If you have been turned away by the big banks or other mainstream lenders because you are a new immigrant in Canada, you have options. There are many mortgage programs that exist to help new Canadians secure a mortgage — and we can help you find the right one for your situation.
Watch the video below to learn about buying your first home in Canada:
Applying to New Immigrant Mortgage Programs
If you are applying to a mortgage program for new immigrants in Canada, commonly referred to as a New to Canada mortgage, then your ability to secure a mortgage will depend on three main factors:
- Your status as a permanent resident in Canada
- Your credit rating in Canada
- The size of your down payment for a home
In this article, we will break down how each of these three factors will influence your ability to access a mortgage and how you can improve your chances of securing approval.
Applying for Permanent Residency in Canada
Permanent residency is your first step in the process towards becoming a full Canadian citizen. To apply for permanent residency in Canada, you must have been physically present in Canada for at least 730 days (2 years) in the past five-year period. This means that most permanent residents will need to have lived in Canada for a minimum of 2 years.
Permanent residency makes it possible for new Canadians to apply for traditional mortgages through A lenders. If you are not a permanent resident, you will need to have submitted an application for permanent residency and hold a current work permit, in order to apply for a traditional mortgage.
If you do not meet either of the conditions listed above, it may still be possible to secure a mortgage through Canada’s default mortgage lenders: CMHC, Genworth Canada, and Canada Guaranty. You can find links to these lenders and their programs below.
Building Your Credit Rating
As a new immigrant, it is likely that you won’t have an existing credit rating in Canada. If you are planning on buying a home in the future, we recommend that you start building your credit score up as soon as possible. There a number of ways to build credit effectively. These include:
- Credit Cards: Apply for credit cards, use them regularly, and pay them off promptly each month. Missed or late payments will hurt your credit score, so avoid this if possible. Only apply for credit cards that you plan to use, as unused credit cards may negatively impact your credit rating.
- Minor Loans: Apply for loans from your local bank and make sure you make regular payments on them, as dictated by your lender. Similar to other forms of credit, paid loans will show lenders that you are capable of being financially responsible.
- Bill Payments: Be sure to pay your bills on time. Missed or late payments on phone bills, utility bills, and rent can negatively impact your credit score.
- Employment: Staying with the same employer for a long period of time is a good indicator that you have a reliable source of income to support a mortgage. You may need to provide proof of your employment history, so keep any employment contracts or pay stubs from past or current jobs.
The process of building your credit can take 18-24 months, before you are in a position to apply for a loan. If you don’t want to wait this long, there are alternative ways to prove you have a strong credit history to lenders.
Alternative Credit Proof
Showing alternative credit will allow you to apply for a New to Canada mortgage, through default mortgage lenders like CMHC, Genworth Canada, or Canada Guaranty.
An alternative verification of credit will require a variety of supporting documentation, depending on the program, the lender, and your down payment. These documents may include:
- A valid work permit or verification of landed immigrant status.
- Proof of income confirmed via employment contract or pay stubs.
- Bank statements confirming amount of down payment available.
- Letter of reference from a financial institution.
- Rental payment history for the past 12 months, confirmed via letter from landlord, and bank statements.
- Billing statement for the past 12 months (for hydro/utilities, telephone, cell phone, or auto insurance) OR payment confirmation via letter from service provider.
- An international credit report demonstrating a strong credit profile.
Providing these documents may assist you in accessing a mortgage with as little as 5% down payment. However, we always recommend making a larger down payment if possible.
Saving for a Down Payment
Your down payment amount for a new home is a major factor in securing a mortgage as a new Canadian. You should start saving on a down payment for your home as soon as possible, as it’s one of the largest barriers to homeownership.
It is possible to secure a mortgage as a new immigrant with as little as 5 – 10% down payment, if you meet certain conditions. Use the chart below to see what down payment is required in your situation and what mortgages are available to you.
|Residency Status||Credit History||Down Payment Required||Mortgages Available|
|Permanent Residency||Alternative||5%||New to Canada|
|Application in Progress & Work Permit||Strong||5%||Traditional|
|Application in Progress & Work Permit||Alternative||10%||New to Canada|
|Work Permit or Landed Immigrant Status||Strong||5%||New to Canada|
|Work Permit or Landed Immigrant Status||Alternative||10%||New to Canada|
New to Canada Mortgage Lenders
If you are interested in a New to Canada mortgage, there are different programs offered by Canada’s three default mortgage providers:
- Genworth Canada — New to Canada Program
- Canadian Mortgage & Housing Corporation (CMHC) — Housing for Newcomers
- Canada Guaranty — Maple Leaf Advantage
In general, each program has similar requirements for residency status, credit rating, and down payments to what we have described above. However, there are minor differences with each program that a professional will be able to help you understand.
The team of mortgage specialists at Main Street have extensive experience helping newcomers apply for New to Canada mortgages and can help match you with the right program for your specific situation. Contact us today to start applying for your first mortgage today.