How to Apply for a Mortgage Loan as a Newcomer in Canada

When new immigrants arrive in Canada, one of the first things they want to do is create a home. If you do not have the finances to purchase a house outright, you cannot buy a home and qualify for a mortgage.

You must meet specific financial standards established by Canadian banks and financial organizations. This may appear scary and even difficult due to misconceptions.

There is a misconception that newcomers can only obtain a mortgage from a Canadian bank if they have a solid credit history or if they have a few years of employment experience in Canada.

This misconception has to be corrected and this is why you are reading this article. This guide emphasizes how newcomers can apply for a mortgage loan in Canada. It also explains the requirements, criteria, and other information.

Continue reading.

Understand the present real estate market.

While your money, credit history, current debt load, and even residency status all have an impact on your capacity to buy real estate, there are more aspects to consider. 

The current situation of the national and local real estate markets in which you want to buy has an impact on your purchasing power.

Many indicators suggest that real estate prices will fall by up to 25% by the end of 2023. Between February and June of this year, real estate sales decreased by more than 18%, with many consumers delaying purchases owing to inflation and rising living costs.

If you have the cash to buy and are seeking in a location with a big volume of available property, this could work in your favor. 

However, if the value of your investments has decreased or your daily expenses have increased, it may appear more difficult to make your homeownership ambitions a reality, at least for the time being.

What is a mortgage?

A mortgage is a sort of loan acquired to finance the costs of owning a home, whether it is a residential home or an investment property. 

Banks generally function as lenders, charging mortgage fees and interest for their services. Borrowers are expected to repay their loans within the time frame agreed upon at the time of application.

Who are the New Immigrants?

If you have relocated from your home country to Canada with the intention of permanently settling there, you are considered a Canadian immigrant. An immigrant newcomer is someone who has moved in within the preceding five years.

What is a newcomer mortgage, and who is qualified for it?

Some Canadian banks provide a newcomer mortgage program to help new immigrants buy property. It is worth noting that the eligibility conditions for this program are more permissive than those for standard mortgages issued to Canadian residents or citizens.

Newcomer Mortgage Eligibility Criteria:

The eligibility conditions are listed below:

● You must have relocated to Canada within the past five years.

● You must be a permanent resident, a landed immigrant, have a work visa, or be a refugee and Citizenship Canada (IRCC).

● You must have at least two years of employment experience.

● A minimum down payment of 5% is required for properties priced under $500,000.

● If the purchase price is between $500,000 and $999,999, the down payment is determined as follows: 5% for the first $500,000 and 10% for amounts greater than $500,000 and below $999,999

● If the buying price is $1 million or more, the down payment has to be 20%.

● Your gross debt-service ratio must be 39% or below. Gross debt service is calculated by dividing the cost of your home by your gross income. For example, if your home is worth $500,000 and you make $50,000 per year, your gross debt service ratio is 10%, which is okay. The concept is that 39% of your lower gross income must be spent on housing, leaving the rest to cover other expenses.

● Your entire debt service ratio must be 44% or below. This is calculated by taking your monthly household income and dividing it by your total debt.  Loan repayments should not take up more than 44% of your household income.

What documentation are required to apply for a newcomer mortgage in Canada?

● Proof of job and income from stable sources.

● purchase and selling deeds for the home

● Bank statement

● Credit report

● Utility bill payment records

● Reference letter from a financial institution, even if it is from the newcomer’s native country.

How to Apply for a Mortgage Loan as a Newcomer in Canada

● Determine the down payment you can make and set aside the funds.

● Begin developing a credit history in Canada.

● Research and select a newbie mortgage program. Consult with a mortgage consultant if needed.

● Determine how much you can borrow and whether you can afford the loan payments.

● Once completed, contact a real estate agent to acquire a home within your budget.

Best Newcomer Mortgage Programs in Canada

We have identified some of the most popular newcomer mortgage programs in Canada:

1. RBC Mortgages for Newcomers in Canada

RBC is one of the institutions that offers a 120-day guarantee and a competitive interest rate, and it does not require credit history for a first-time mortgage applicant. 

If you apply for a loan for 80% of the home’s value, you can select a period of up to 30 years. RBC is well-known for its rapid loan acceptance and processing times. 

You can also tailor your mortgage alternatives by meeting with a mortgage expert one-on-one.

2. Canadian Imperial Bank of Commerce (CIBC)

Within CIBC, the service provider offers three schemes as shown below:

The CIBC Newcomer to Canada Program Mortgage is suitable for individuals with low credit history but sufficient income to repay debt.

The CIBC Newcomer to Canada PLUS Program Mortgage is designed for those who have previously lived in Canada and have returned after a period of time abroad. You do not need a credit history to accomplish this.

The CIBC Foreign Worker Program Mortgage is available to those with a work permit in Canada and does not require a credit check.

3. Scotiabank StartRight Mortgage Program

The Start Right program is for temporary residents of Canada. You can make repayments on a weekly, biweekly, semi-monthly, or monthly basis. It provides insurance. 

You can select either a variable or fixed interest rate. The variable mortgage rate ranges from 6.150% to 9.250%, while the fixed rate ranges from 6.090% to 7% based on the number of years.

4. TD Mortgages for Newcomers.

This strategy does not require a credit background. You must have a TD checking account, provide proof of domicile, proof of age, a valid passport, a Canadian driver’s license, and a government of Canada ID. You must provide either your PR card, confirmation of PR, or your interim permit.

5. HSBC New to Canada Mortgage

This program allows you to open a bank account before arriving in Canada, and your overseas credit history and reports are acceptable for this application. 

You can consult with a mortgage consultant to tailor your loan options based on the real estate investment you intend to make for your dream home.

Insure your newcomer mortgage in Canada.

The Canada Mortgage and Housing Corporation (CMHC) is part of the Canadian government. For your newcomer loan to be insured, you must be a permanent resident with a credit score of 600 or above. If you have a limited credit history, your utility bill payments will be reviewed.

If you are not a permanent resident, your international credit record will be reviewed and a reference letter obtained. The home’s buying price must be $1 million or less. You must make a down payment of at least 5% for $500,000 and 10% for the home’s residual value.

Can you acquire a mortgage if you don’t have any credit history in Canada?

You will have difficulty getting a mortgage authorized if you have no credit history. However, this is not impossible. 

As previously stated, RBC mortgage for newcomer does not require you to have a credit history in Canada if you meet the criterion of a newbie.

Similarly, the TD Mortgage for Newcomers, the CIBC Newcomer to Canada PLUS Program Mortgage, and the CIBC Foreign Worker Program Mortgage, among others, do not require a Canadian credit history.

However, if you prefer another service provider, you can ask a bank representative if they will accept an overseas credit history, alternative documentation such as regular utility bill payment, and a co-signer on your loan.

FAQS

Can I receive a mortgage from a big bank as a newcomer in Canada? 

Yes, we have mentioned the newbie mortgage programs given by the top five banks in Canada:

● Royal bank of Canada (RBC): RBC Mortgages for Newcomers to Canada

● TD Bank: TD Mortgages for Newcomers

● Bank of Nova Scotia: Scotiabank StartRight Mortgage Program

● Bank of Montreal: None

● Canadian Imperial Bank of Commerce: CIBC Newcomer to Canada Program Mortgage, CIBC Newcomer to Canada PLUS Program Mortgage, and CIBC Foreign Worker Program Mortgage

Can I acquire a mortgage if I don’t have any employment history in Canada?

To qualify for a mortgage, you should have at least two years of Canadian job history. However, it is not difficult to obtain a mortgage in Canada despite having no or limited employment experience.

For example, if you apply with RBC, all they require is that you meet the requirements of a newcomer, be a permanent resident, have three months of employment experience, and have a legitimate letter of reference from your home bank.

You can also call other service providers to see if they will accept a co-signer, higher down payments, additional sources of solid income, a record of your other assets, and proof of other finances.

How do I get a mortgage in Canada as a newcomer?

To qualify for a newcomer mortgage, you must have at least three months of full-time work experience in Canada. You have to either: Make a down payment of at least 10% of the home’s purchase price, providing you have Canadian credit and are eligible for mortgage default insurance.

Can an immigrant obtain a mortgage in Canada?

We have additional good news for you: immigrants can get a mortgage if they meet certain financial standards. Many Canadian banks and lenders are eager to cooperate with newcomers to the nation, even if they do not have a strong Canadian credit history.

Can I get a mortgage in Canada without permanent residency?

If you’re a newbie to Canada, you can receive a mortgage for a principal residence if you meet the following requirements: You must hold permanent residence (PR) status. A SIN number that does not begin with nine. Have an acceptable income, which means you’ve worked full-time in Canada. 

How long do I have to live in Canada to qualify for a mortgage?

You must have immigrated to Canada within five years. You must hold permanent resident status. You must have at least three months of full-time employment in Canada. You may be needed to obtain a letter of recommendation from your bank in your native country.

How much income is required to get a mortgage in Canada?

To buy the average-priced home in Canada with a 20% downpayment, you’ll need an income of 3 to 3.5 times your mortgage amount. A household’s gross annual income required to buy an average-priced property is lowest in Newfoundland and highest in Vancouver.

Do you need to work to receive a mortgage in Canada?

In Canada, lenders may evaluate income from a variety of sources, including rental properties, investments, and child and spousal support. Evidence of steady, verifiable income can help boost your mortgage application by demonstrating your ability to pay financial responsibilities.

Conclusion

You can even acquire a home before traveling in Canada using virtual home tours and e-signature. 

As a newbie, you may be qualified for a first-time home buying program. If you are still unable to obtain a mortgage as a newbie through a bank after following all of these processes, you can seek the assistance of a private lender.

There may be other mortgage schemes available for newcomers to Canada. We have picked the most popular ones. 

As an immigrant, you may confront a variety of problems in your new location. However, financial organizations continue to provide a variety of Newcomer perks, including mortgage programs, bank accounts, and credit cards with multiple bonuses. So keep tuned for great offerings!

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