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Canada Mortgage and Housing Corporation (CMHC), Canada's national housing agency, has been assisting Canadians and newcomers in gaining access to information, videos, and tools to help them make educated decisions on homeownership.
The good news is newcomers are not barred from purchasing a home in Canada, even immediately upon arrival. Barring a few exceptions which usually involve foreign buyer taxes, even a non-resident or non-citizen can purchase real estate in Canada provided they can afford it.
Most people looking to buy a home, especially in a new country, would require financing. This usually comes in the form of a mortgage, and here is where newcomers may encounter difficulties in purchasing a property due to their lack of Canadian credit history, as well as a lack of Canadian employment history.
So what can you do as a newcomer, since you have neither employment or credit history in Canada? The CMHC may consider alternative methods of establishing creditworthiness for borrowers without a credit history, depending on appropriate endorsements from financial institutions.
For most countries, creditworthiness cannot be established through an international credit record. With this in mind, mortgage specialists should get a letter of reference from the borrower's financial institution in their place of origin. This helps establish that in their place of origin, the borrower is in good standing.
Fully aware of the challenges facing newcomers, banks have been known to be flexible enough to accommodate them, often involving a few additional conditions. These additional conditions fall under what is termed as the newcomer’s mortgage, and here are those conditions, which we consider the 5 L’s:
You must be either a permanent resident or landed immigrant, or have a work permit if you are a non-permanent resident. Otherwise, your stay in Canada does not meet the legal requirements for a newcomer’s mortgage.
If you have immigrated to Canada and stayed here for longer than five years, you no longer have newcomer status.
Unless your present employer is relocating you to Canada, this mortgage requires you to have a full-time employment for at least three months in Canada.
For a home price of less than $500,000, you must have your own saved money to make a down payment of at least 5%. The minimum down payment increases as the home price increases. Canadian lenders will also require you to obtain proof of your source of funds from savings, chequing, cash gifts, & non-Canadian funds. For newcomers without 2 years of employment or credit history, a minimum of 35% down payment will be required.
Your debt service ratio shows how much of your income goes to service your debt. The lower this ratio is, the more helpful it will be with your application for a newcomer’s mortgage. A gross debt service ratio (GDS) of 39% or less, and a total debt service ratio (TDS) of 44% or less is required.
Once these conditions are met, the process for buying a home is mostly the same: once you know how much you can borrow from your chosen mortgage lender, it gives you a home budget you can work with. Upon selecting the house you want to live in, you check it out, make an offer, then finalize your financing with the bank.
We realize that this seems to be a lot of information to gather before you begin looking for your first house. However, bear in mind that banks that provide mortgage programs for newcomers are aware of the difficulties you may experience. As a result, they frequently have specialized mortgage professionals who will work with you to identify what is best for your specific circumstances.
As easy as all of this sounds though, a lot of this still involves a whole lot of paperwork that you might not be familiar with. Combine that issue with the additional requirements often imposed on newcomers, you will definitely encounter a few inconveniences that can be best handled by a trusted professional more attuned to financial institutions’ predilections.
Requity Homes doesn’t just help ease the hurdles newcomers face when trying to own a home, it offers an alternative way to get the home of your dreams.
The rent-to-own program under Requity Homes gives you two to three years to build the credit history you need to qualify for a mortgage without all those additional requirements. This is because Requity Homes reports the monthly rent payments you make to the credit bureau. This means that as you rent to own your house, you are actively building your credit score and credit history with Requity Homes while saving for your down payment one month at a time.
Instead of putting it off, you can live in the house of your dreams right away with Requity Homes. Working with Requity Homes also means that we will help walk you through the entire process, with the end goal of getting your into home ownership within 2-3 years of starting the program.
Establishing a new life in Canada might seem daunting at first, but it’s good to know that there is an alternative path that can get you there.
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