07 Jun How to Get a Mortgage as a New Canadian
Are you new to Canada? Are you hoping to buy your first home here? Let’s explore how to get a mortgage as a new Canadian.
Start Building your Credit History in Canada
Before lending you money for a home – called a mortgage – lenders will look at your Canadian credit history. That’s why it’s important to start building your credit as soon as possible once you’ve arrived in the country.
There are many ways to start building your credit report. Canadian bank accounts, credit cards, employment, rent and utility bills can all help establish your financial history. In order to get you started, many banks have packages specifically for new Canadians, complete with a chequing account, a savings account and a credit card.
In order to build a good credit rating, you will need to pay all of your bills on time, every month. Working for the same company and paying your bills in a timely manner for over 12 months, for example, shows stability. That makes you a more desirable borrower. If you would like to buy a home even sooner, be advised that most lenders will require at least 3 months of full time work with the same employer in order to consider an application.
Save Up a Down Payment
In Canada, buyers are required to put some of their own money towards the cost of their home, which is called a down payment. As you work on building your credit, make sure to set some money aside each month. Minimum down payment amounts are set at 5 to 10 per cent, depending on the cost of the home. More information on down payment rules in Canada can be found here.
The next step to getting your first mortgage is going through the pre-approval process. This is done with a mortgage professional, like your lender or licenced mortgage broker.
Pre-approvals have several benefits. First, they give you an estimate of the amount of money you can borrow, based on the information you have provided. Getting pre-approved for a mortgage is kind of like a dry-run – it helps you establish how much house you can afford, and what your payments will look like.
Note that most lenders don’t verify your information until later on, when you apply for your mortgage. If your information can’t be verified, or your situation has changed, your loan eligibility and amount may need to be adjusted.
A second benefit to getting pre-approved is locking in your interest rate. Lenders usually hold the rate for up to 120 days – and even longer for new construction.
When meeting with your mortgage professional, ask if they have programs for new Canadians. Some offer loans to those who have been permanent residents, for example, but don’t yet have a complete credit history. Others will accept international credit reports when qualifying you for a mortgage.
Looking for more information on buying your first home in Canada? The Canada Mortgage and Housing Corporation (CMHC) created a webpage on housing for newcomers, available in several languages. Ready to buy your first home? Contact me today to set up an appointment and learn more about getting your first mortgage.