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How To Get A Mortgage When You're New To Canada

If you’re new to Canada and want to buy a home, there’s two pieces of good news.

The first is that there are new to Canada mortgage programs that can help you get into a home.

The second is that you may actually qualify for a traditional mortgage, even if you’re not a citizen of Canada!

Which program you qualify for depends on if you’re a permanent resident, how much you have saved for a down payment, and your Canadian credit history.

Residency Status

Credit

Down Payment

Mortgage Program

Permanent Resident

Strong Canadian history

5%

Traditional

Permanent Resident

Alternate credit proof

5%

New to Canada

In-progress application PLUS a valid work permit

Strong Canadian history

5%

Traditional

In-progress application PLUS a valid work permit

Alternate credit proof

10%

New to Canada

Work permit

Strong Canadian history

5%

New to Canada

Work permit

Alternate credit proof

10%

New to Canada

 

Let’s break down this table to see what program you would need.

 

Residency Status

You don’t have to be a Canadian citizen to get a mortgage, but you do need an official designation as a permanent resident, or be working towards it and have a work permit.

Permanent Residency

In order to become a permanent resident of Canada, you must have been physically present in Canada for 2 out of the previous 5 years. That’s 730 days.

The fastest way to achieve this is to live here uninterrupted for 2 years. The 730 days don’t have to be in a row – you can come and go as often as you want, but you must have a total of 730 days in Canada in a 5-year period.

You can lose your permanent resident status if you don’t have at least 730 days lived in Canada in any 5-year period, so be sure to avoid lengthy, unnecessary travel.

As a permanent resident, you can qualify for a traditional mortgage from a bank if you have a Canadian credit history. We’ll talk about what makes a strong credit history further down.

If you’re a permanent resident without a strong Canadian credit history, you won’t be able to qualify for a traditional mortgage but can still apply for a new to Canada program.

 

Working on permanent residency

If you’ve submitted the documents for your permanent residency, but haven’t received it yet, you can still qualify for both a traditional mortgage and new to Canada program. For that, you need a valid work permit.

In order to qualify for a traditional mortgage, you need a strong Canadian credit history, but with alternate proof you can qualify for a new to Canada mortgage.

 

 

 

Building your credit

If you want the best mortgage rates in Canada, then you’ll have to have a strong credit history in Canada. The only way to build credit is to have it and use it. That includes things like:

·        Having and using a Canadian credit card

·        Taking out loans

·        Paying bills on time

 

Using a Canadian credit card

There are many credit cards in Canada for people with no credit. These are called secured credit cards, and require a deposit (usually a couple hundred dollars). Unlike a prepaid credit card, which requires you to load funds before you make a purchase, a secured card works like a regular credit card.

That means a prepaid credit card will NOT build your credit in Canada.

When using a credit card, be sure to always pay it off every month to avoid interest charges. Also be sure to never miss a payment – a late or missed payment on your credit report can cause your score to drop.

 

Taking out loans

You shouldn’t take out a loan to improve your credit score alone. There should be a reason for taking out a loan.

If you never miss a payment, this is help improve your credit.

 

Bill payments

Some utilities in Canada report to credit bureaus. In other words, paying your cell phone, gas and water bill, or rent can help improve your credit.

 

How long will it take to build credit?

Building credit is not a quick process, especially when you have no history in Canada.

You can expect to wait between 18 and 24 months (1 ½ - 2 years) before you get a good credit score, assuming you never miss a payment. Remember that missed payments will hurt your score!

 

Alternate credit proof

If you don’t want to wait more than a year to buy a home in Canada, then there are still ways to get a mortgage.

Without a Canadian credit history you have to use a new to Canada program, which has different rules and interest rates than a traditional mortgage.

Some of the documents you may need for an alternate credit proof include:

·        A valid work permit

o   If you’re not legally allowed to work in Canada, it will be very hard to prove you can afford a mortgage.

·        Proof of income

o   Even if you are legally allowed to work in Canada, you must prove you’re making enough money to pay off your mortgage.

·        Bank statements

o   You will need to prove you have enough money in your bank account to pay the down payment on the house you want to buy. The minimum down payment is 5% of the purchase price, but you may need 10% or more if you don’t have strong Canadian credit.

·        Rental payment history for the past 12 months

o   Your landlord should provide a letter that confirms the amount paid, and you should have bank statements that show the money leaving your account.

·        Billing statement history for the past 12 months

o   Bring bank statements that show money being withdrawn equal to the amount owed for bills.

·        An international credit report

o   If you have excellent credit in your home country, then your credit report may be able to be used in Canada to show you have good credit. This doesn’t work for every country.

 


Chris Chris 05/16/2019
Canadian personal finance buff and all-around writing enthusiast, Chris loves breaking down complicated money ideas to show that they're really not so complex. 
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