If you know a Permanent or Temporary Canadian Resident who is considering buying a home, have them call me to discuss details before you start showing them homes. While they can’t get pre-approved under a New to Canada program, I can complete a pre-qualification to ensure that you are not wasting your time with clients that won’t qualify!
New Canadian Mortgage: Permanent Resident vs Temporary Resident
Just because you are not a Canadian citizen, doesn’t mean that you can’t be approved for a mortgage or buy a home in Canada.
Depending on the lender, you will be considered “New to Canada” if you have been in Canada for less than 3 to 5 years (36 to 60 months). Those who have a Permanent Resident Card, and a SIN number beginning with something other than a ‘9’, will typically have greater flexibility than those who are Temporary Residents (in Canada under a Work Permit, and have a SIN Card beginning with a ‘9’).
As a Permanent Resident, the borrower may qualify for the following programs:
- Purchase, including Purchase Plus Improvements, and
- Rental Programs
Temporary Residents must provide a valid work permit, showing validation for a minimum six months. A copy of a passport from Country of origin is required, as well as a copy of the Work Permit.
Permanent residents must provide their Permanent Residency Card.
Most New to Canada mortgages will have to be insured (ie. CMHC) to protect the lender. This premium is added to the base mortgage amount.
Down Payment
Permanent Residents
A minimum 5% down payment is required and must come from your own resources. Anything over 5% down can come from immediate family as a gift, corporate relocation subsidy, or can be borrowed from a third-party that has no interest in the property under a ‘flex’ down program.
Temporary Residents
A minimum 10% down payment is typically required, but 5% is possible for a very strong file with Canada Guaranty, and can only come from your own resources.
Credit
Lenders will require two forms of alternative credit if borrowers don’t have two full years of reporting history on their credit bureau.
Lenders will require two of these three documents:
- International Credit Report if it’s from an approved country/institution
- Landlord letter, showing payments have been made on time for the previous 12 months
- Twelve-month history of utility payment from a Canadian bank account may be required
- Letter from an accredited financial institution
- 6-12 months of bank statements
The above are minimum requirements. Some form of Canadian credit is always helpful, so checkout these tips to increase your score:
- Open a bank account and use it regularly
- Consistently pay your bills on time, including rent, utilities, cable, cell phone (now reports to credit bureau) and insurance premiums
- Apply for small loans (overdraft, for example) from your bank to begin proving that you can pay on time
- Apply for a credit card. Sometimes it’s easier to apply for a Secured Credit Card, where you put up a deposit to use the card.
Income
Most lenders require three months of work history, verified by a letter from your employer, with no probation. Pay stubs will also be required for Income verification.
The employment letter is very specific and must detail the nature of your work, your salary or rate of pay, any guaranteed hours, and how long you have been employed with the company.
New to Canada residents, like Canadians, must include all debts (including any foreign debts) on the mortgage application. Foreign rental income is not typically allowed to be included as ‘income’ in the affordability calculations, but any mortgage payments, property taxes, and condo fees would be included as a debt, so check with your mortgage broker.
Co-written with the team from Your Mortgage Advantage – Susan Ashton, Martin Breeze, Brooke Juba, Garett Courtier and Jeff McGinn
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