Guest Blog from a Mortgage Broker
One of the biggest challenges to people who are new to Canada is finding a home to live in. Buying may be an option for some of our clients, but there are complications involved in getting your first mortgage in Canada. Here is a mortgage broker with experience dealing with this complicated issue.
This post is by Lysa Dixon. Lysa is not associated with Elgin, Cannon & Associates.
Buying a Home in Canada as a permanent or temporary resident
The decision to relocate to Canada is a big one, and whether your are here on a work visa, or here as a Permanent Resident, part of your plan may be to purchase a home in Canada.
The cost of housing in Canada generally requires the purchaser to take out a mortgage in order to assist with the financing. Simply put, a mortgage is a loan secured against the property, which is paid off with interest over time.
As long as you have been in Canada for less then 5 years, have either a valid work permit, or Permanent Residence status, and have permanent, full time employment, you may qualify for a mortgage as a new to Canada applicant. Generally, you will have to show you have been with your current employer for a minimum of 3 months, however in the case of corporate relocation exceptions may be made. In order to purchase a home, you will also need to show that you have a portion of the purchase price as downpayment-sometimes as little as 5% of the purchase price. This downpayment must generally be from your own resources, although a portion can sometimes be in the form of a gift from an immediate family member, or a corporate subsidy. It’s important to note that your down payment can never be borrowed, and you must be prepared to show a history and proof of these funds. This will require providing bank or investment statements so if your statements are in a language other then english or french, be prepared for the extra cost and time required to have official translations done. Keep in mind as well that anything less then 20% down will also require mortgage default insurance.
In approving you for a mortgage loan, your lender will want to review your credit rating and history. This can be challenging, especially if you have only been in Canada for a short time. Most lenders recognize this difficulty, and in the case of new to Canada, are willing to look at alternate forms of credit. It’s always a good idea to have a letter from your financial institution of your origin country, confirming a minimum of 6 months satisfactory banking relationship. Again, if this letter is not in english or french, you will need to have official translations done. If you have been in Canada for a while, you can provide 12 months rental payment history and utility payment history as proof of credit. Knowing this, you will want to make sure you are paying everything on time and in full as you prepare to purchase a home! Some lenders will want to look at an international credit report, which can take time to obtain. You can also start working on your credit history as soon as you arrive in Canada- visit your local financial institution to obtain a credit card as soon as you can. Many institutions offered secured credit products that will require a deposit as security, but can help you to start building your Canadian credit right away.
In evaluating your acceptance for a mortgage loan, lenders are going to consider not only your credit worthiness, but your level of debt as well. If you have mortgaged property in your country of origin, or have any other debts, you will need to provide documentation (translated if not in french or english) of these debts, and they will be considered against your income. Unfortunately rental income, or any other foreign income, will generally not be considered as part of your income.
In short, qualified applicants who have relocated to Canada may qualify for mortgage financing at the lender best rates. These mortgages can be obtained from a variety of banks, credit unions and other lenders. As the terms, rates, mortgage features and qualification criteria can vary from institution to institution, working with a Mortgage Professional who has access to a variety of products can assist you in navigating the requirements and obtaining the financing for your first Canadian home purchase.
Lysa Dixon is a licensed Mortgage Professional based in Vancouver, BC, working with TMG Averbach Mortgages. She enjoys her work with new Canadians, helping them to navigate their home financing options in their new country. You can visit her website at lysadixon.com, or she can be reached directly at [email protected].