New to Canada, Permanent Residents & Foreign Workers
New to Canada, Permanent Residents & Foreign Workers
Every year, thousands of new immigrants come to Canada to live, work and achieve the dream of a new life in our country. As immigrants establish their home and family and start growing roots in their communities, their dream of homeownership will most likely start growing too.
In Canada, immigrants can make their dreams of home ownership a reality; however, immigrants can be faced with some difficulties in the process of buying a home, such as having limited Canadian employment history, not having enough savings for down payment, or a lack of Canadian credit history. Both your credit history and your employment history play an important role in qualifying for a conventional mortgage, so for newcomers, this can make it very hard to qualify. Luckily, during the last decade Canada has established several mortgage programs designed specifically to make it easier for new immigrants to buy their first home in Canada. These mortgages are called “Newcomer Mortgages.”
What is a Newcomer Mortgage?
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A Newcomer Mortgage is a special mortgage product offered by Canadian lenders designed to make it easier for new immigrants to purchase homes despite difficulties they may face. In newcomer mortgages, banks are less strict on credit and employment history requirements, and provide alternative means for qualification purposes, such as looking at rent deposits, and even sometimes will take into consideration the immigrants’ credit history from their country of origin.
Here at 911 Mortgage Brokers – The Mortgage Centre, we work with the banks and institutional lenders to provide Newcomers Mortgages. We will find the right Newcomer Mortgage that matches your needs, your goals and your lifestyle.
Who is eligible?
There are a few criteria that a borrower must meet in order to be considered a newcomer and to qualify for the appropriate mortgage. The qualification requirements may vary slightly between different lenders.
Overall, the terms available for newcomer mortgages are a bit less favourable than a conventional mortgage. There is a trade-off that newcomers must accept between accessing home financing in exchange for stricter terms. The banks do this to protect themselves, as they are unable to rely as much on y our creditworthiness due to a lack of history in Canada, making these loans somewhat riskier in their eyes. Taking on mortgage default insurance can in some cases make terms a little more favourable, but it does come with its own costs and eligibility criteria as well.
Who counts as a newcomer to Canada?
The first step is determining if you are a newcomer in the eyes of the bank. Usually, this means someone who has moved to Canada in the last five years. Newcomer mortgages also mostly cater to those who are either permanent residents or temporary residents with work visas. Some lenders may also offer something similar to a newcomer mortgage for Canadian citizens who have lived abroad for a number of years and have a lack of Canadian work or credit history.
Even if you qualify under these rules, you still may be able to get a conventional mortgage if you have two years of employment history in Canada and enough for a 20% down payment.
Standard Newcomer Mortgage Approval Criteria
- Down payment as low as 5% for Permanent Residents
- Down payment as low as 10% for temporary or work visa residents.
- Two-year Canadian credit history is not required but some established credit may help.
- Typically 6 months to 1 year proof of consistent payments for Rent, cell phone, car insurance, utility bill or other regular expense.
- If insufficient payment history is available, you may require a letter of good payment standing from a former non-Canadian financial institution.
With 20% – 35% down payment lenders can become more flexible.
Down payments may be larger in some cases
Another area where newcomer mortgages differ is in down payments. If you have not been employed in Canada for at least two years, some lenders will require larger down payments of at least 35% in order to get a mortgage. In order to pay a lower down payment, you will either need a longer employment history or pay to get mortgage default insurance on your loan.
Some lenders will also prevent you from taking a mortgage loan if a portion of your down payment is loaned or borrowed. Lenders may also limit your options for an amortization period, for example restricting you to a period of only 25 years.
Mortgage rates are comparable
In terms of mortgage rates, the rates available to newcomers are comparable to conventional mortgages, but they will vary greatly from lender to lender and based on the borrowers’ circumstances. Generally, the longer your employment history in Canada, the size of your down payment, and whether or not you have mortgage insurance are all ways you can impact the mortgage rates you are offered.
Some lenders require references from home bank
Finally, though you may not have much financial history in Canada, you probably have more history in your country of origin. Some lenders will require you to get a letter of reference from your bank in your originating country if you do not have two years of employment history in Canada.
Newcomer Mortgage Default Insurance
Just like with conventional mortgages, you can get mortgage default insurance when you have a newcomer mortgage. Mortgage insurance for newcomers is its own separate category of default insurance and has its own criteria required for eligibility.
PERMANENT RESIDENTS VS. NON-PERMANENT RESIDENTS
Firstly, borrowers will fall into one of two categories, these being permanent residents and non-permanent residents (people who live in Canada and are legally authorized to work via a work permit). These two categories will depend on how the CMHC determines your creditworthiness.
For permanent residents, CMHC requires at least one borrower or guarantor in the transaction to have a credit score of at least 600, though they may offer alternative accommodations for those with no credit score at all.
For non-permanent residents originating from the U.S. who do not have a Canadian credit history, CMHC can obtain an international credit report for qualification purposes. For those coming from somewhere other than the U.S. and lacking a credit history, CMHC will require a letter of reference from the borrower’s bank in their originating country.
Once creditworthiness has been established, there are a couple of other criteria the CMHC requires for their insurance coverage.
Maximum loan to value rations (LTV)
Permanent residents who are purchasing owner-occupied units must have a maximum loan-to-value ratio of 95% for a 1-2 unit property, and 90% for a 3-4 unit property. Non-permanent residents may only qualify if purchasing a one-unit property at a minimum of 90% LTV.
Minimum down payments
As is common with all CMHC insurance, the minimum down payment may only be 5% on properties costing $500,000 or less, and a minimum of10% on any amount above that. The borrower must also be purchasing a property of less than $1 million to qualify.
Amortization period and debt service ratios
Borrowers using this insurance are limited to 25-year amortization periods. They must also meet certain debt service requirements with a maximum of 39% gross debt service ratio and 44% total debt service ratio.
These debt service ratios are also subject to the mortgage stress test, like any other mortgage, requiring to be calculated at a rate of 2% above the contract rate, or 5.25%, whichever is higher. Borrowers will have access to both variable and fixed-rate options
Insurance rates
Finally, the actual price for insurance premiums with CMHC newcomer’s mortgage loan insurance is the same as those required by standard mortgage insurance.
Newcomers may also get Sagen mortgage insurance or Canada Guaranty mortgage insurance. These companies offer similar criteria to the CMHC rules, though the exact rules may differ.
Applying for a newcomer mortgage
Besides having different qualification criteria and offering slightly different terms, the process of acquiring a newcomer mortgage is very much the same as getting a conventional mortgage.
The first step will be to save up for a down payment and determine what your budget is. From there, you should look into getting pre-approved.
Permanent Resident Mortgage Requirements
As a permanent resident, you will have access to a variety of mortgages and programs. You could qualify for a standard mortgage if you have a good credit rating. This means one of the applicants must have a credit score of 680 or higher. You will also require at least a 5% down payment.
If you do not have a good credit score, you can still qualify for a mortgage through a newcomer to Canada program. You will still require a minimum 5% down payment.
If you are paying less than 20% of the cost of the purchase price, you will have to get mortgage loan insurance.
Foreign Workers Mortgage Requirements
As a foreign worker you have specific requirements to qualify for a mortgage. For example, you must:
- be legally authorized to work in Canada
- have a work permit
- purchase a property you will live in
- put down a minimum of a 10% down payment.
With a good credit rating, you could qualify for a standard mortgage. If you do not have established credit in Canada, you may have to get a letter of reference from your financial institution from your country of origin. You will need to qualify under a new to Canada program.
How 911 Mortgage Brokers can help
Our 911 Mortgage Brokers have helped many new immigrants and foreign workers obtain a mortgage for the purpose of buying their first home. As we work with lenders across Canada, we have access to all the Newcomer Mortgage programs available. As the process may seem a bit complicated at first, our expert Mortgage brokers and agents will explain the process in detail, from the stage of pre-approval to the day you get the keys to your new home in your hand. We take pride in helping newcomers establish their home and deepen their roots and homeownership is definitely the way to go!
Many past clients who were new immigrants at the time are now happily enjoying their homes and benefiting from their home equity increasing year over year. As you grow your family and your needs will possibly change; we will be there to assist you in the next phase of your life. Whether it is a refinance, a home renovation, or a second mortgage down the line, our 911 Mortgage brokers can provide you the mortgage solution that you need. However, the first step in buying your first home is to get in the market and to do so, you must get pre-approved.
Please contact us so we can explore your options. Depending on your current financial situation as a newcomer, permanent resident, or foreign worker, your 911 mortgage broker or agent will help you identify what documentation will be needed to process your mortgage and we will explore your mortgage options with you.
Call Us Today at 289-318-0911 or Toll Free at 1-888-377-0911 for a free confidential consultation to discuss your options.
Our Service Areas
911 Mortgage Brokers – The Mortgage Centre offers services to clients across Toronto and the GTA, Vaughan, King, Aurora, Stouffville, Newmarket, Markham, Richmond Hill, Barrie, Innisfil, Orillia, Collingwood, Oshawa, Ajax, Whitby, Mississauga, Brampton, Caledon, Burlington, Oakville, Milton, Bolton, Hamilton, St. Catherines, Niagara Falls, Windsor, Kitchener, Waterloo, London, as well as far as Muskoka cottage country, Ottawa, Simcoe, and the rest of Ontario.
