In Canada, a mortgage is required to buy a home, allowing buyers to spread the cost of purchase over a long period of time. Here, our immigration physicians in Ottawa and Orleans discuss buying a home and how newcomers can get the best mortgage rates in Canada.
How a Newcomer Can Get a Mortgage in Canada
Owning a home in Canada can provide you with stable wealth and long-term security. To do so, you'll need a mortgage. Getting a mortgage can be slightly different for newcomers to this beautiful country.
While the process can be complex, our team at Immigration Physician Ottawa is here to help. If you’re still in the middle of the immigration process, you will need to schedule an immigration medical exam to complete the application. We can help with this at any one of our three convenient locations.
Why is a mortgage needed in Canada?
When you are ready to purchase a home in Canada, you will need to apply for a mortgage. This will allow you to acquire real estate by paying over time rather than upfront, resulting in accessible home ownership. The property you wish to purchase will be the collateral for the bank supplying the loan.
New Immigrant Mortgage Programs in Canada
Many financial institutions in Canada work in conjunction with the government to offer programs designed to assist newcomers with becoming homeowners. These are often referred to as New Immigrant Mortgage Programs or New to Canada Programs.
Qualifying for New Immigrant Mortgage Programs in Canada
When applying for these types of programs, a newcomer should:
- Hold either a permanent residence visa or a temporary work permit in Canada. Those with permanent residence will get the best mortgage rates among immigrants in Canada.
- Reside in Canada for at least 60 months (in most cases) with landed immigrant status.
- You should be three months into full-time employment. Having stable employment can positively impact your credit score and mortgage eligibility.
While permanent residency isn't required, it can help improve your chances. As a permanent resident, you may qualify for better terms and a lower interest rate.
Mortgage Eligibility for Newcomers in Canada
While the eligibility for mortgages can vary, the minimum requirements are:
Status and Residency: Newcomers should have been residents of Canada for a specified period (five years for permanent residents and two years for temporary residents). Landed immigrant status is also required.
Employment History: Certain programs in Canada require at least two years of employment, although this can sometimes be waived with a larger down payment. Learn more about finding a job as a newcomer.
Proof of Income: You will need to show the bank providing your loan that you have a steady income stream. This can play a role in getting the best mortgage rates in Canada.
Down Payment: The standard down payment amount is 5% to 35%. This can depend on your residency status and the cost of the property itself.
Credit History: While having a credit history in Canada can help, alternative forms of creditworthiness can be considered for newcomers. For example, a 12-month rent history and proof of regular monthly obligations in Canada can be considered.
What do you need when applying for a mortgage in Canada?
When applying for your mortgage, you will need to provide the following:
- Down payment records
- Purchase and sale agreement (obtained from your real estate agent once you’ve made an offer on a property and it’s been accepted)
- Employment history
- Proof of rental payments
- Reference letters from financial institutions
- Bank statements
What is the mortgage application process?
Determine What You Can Afford
One of the most crucial steps is understanding how much you can afford to pay for a house. To do this, you will need to consider your monthly living expenses. This includes your annual income, monthly debts, living expenses, and additional costs (such as utilities) to give you a realistic picture of what you can afford.
Build Credit in Canada
Your Canadian credit history will greatly impact the success of your application. You should begin building credit as soon as you arrive in Canada. Paying your phone or cable bills on time and obtaining a credit card can help establish a credit history.
Get Pre-Approved for Your Mortgage
Mortgage pre-approval shows you the maximum amount you will be offered for a mortgage. For the mortgage pre-approval process, the financial institution will assess your finances, such as your income, debts, and credit score.
Find a Real Estate Agent
Once you know how much you can afford and have been pre-approved, the next step is to find a real estate agent. They will help you find a home that fits your budget and life and help you make an offer. They offer unparalleled expertise in the home buying process.
What should you do now?
When you begin on the path to owning your own home in Canada, you will have many steps to go through. This includes submitting your application for permanent residency and arriving in Canada. Once in Canada, you will need to find your first job, build your credit history, and ultimately apply for a mortgage.
Keep in mind that permanent residency allows for the most opportunities in the process. If you still need your immigration medical exam to complete your application, our panel physicians are here to help.
