How Long Must You Reside in Canada to Qualify for a Mortgage?

Getting a Mortgage in Canada as a New Immigrant

Immigrating to Canada is an exciting opportunity for many, but it also brings major financial decisions like taking on a mortgage. While permanent residents can access mortgages in Canada, eligibility depends on your specific immigration status, financial profile, and length of residency here.

By understanding the key requirements, newcomers to Canada can explore home financing options suitable for their situation.

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Overview of Canadian Mortgages

Let’s first look briefly at how mortgages work in Canada.

A mortgage is essentially a loan taken from a lender to buy property – usually a home. The property itself acts as collateral for the loan. If you fail to repay, the lender can seize and sell the property to recover their money.

Mortgages are offered by various institutions in Canada:

• Major banks like RBC, TD, Scotiabank, BMO, CIBC
• Credit unions
• Trust companies
• Private lenders like mortgage investment corporations

The most common type of mortgage is a conventional mortgage backed by a government entity called the Canada Mortgage and Housing Corporation (CMHC).

To qualify for a CMHC-backed mortgage, key criteria lenders evaluate include:

• Gross annual income
• Existing debts and credit score
• Your downpayment amount
• Employment history and stability

Now let’s look at how these criteria apply specifically to new immigrants and what options are available.

Mortgage Eligibility for Permanent Residents

Permanent residents are those who have received permanent residence status in Canada, including:

• Skilled worker class immigrants
• Family sponsorships
• Refugees
• Others in this status

As a permanent resident, you can qualify for a standard CMHC-backed mortgage provided you meet the eligibility criteria. The main requirements are:

1. Credit Score

• A score above 680 is ideal. This demonstrates your creditworthiness.
• If your score is lower, you may need to build your credit further or apply via an alternative mortgage program for newcomers.

2. Down Payment

• You need at least 5% downpayment on the purchase price.
• 20% downpayment avoids paying extra mortgage loan insurance.

3. Income

• Your gross income must be enough to cover mortgage costs and other living expenses. Debt ratios are evaluated.
• Income can be from employment, investments, pension etc. But should be verifiable.

4. Employment

• Having a full-time permanent job (or an accepted job offer) provides stability.
• Self-employment income may also be eligible if you can prove sufficient earnings.

Becoming a permanent resident gives you access to standard mortgages, provided your finances are in order. Now let’s look at what newcomers specifically can access.

Newcomer Mortgage Programs

If you immigrated to Canada relatively recently, you may not fulfil all standard requirements yet. Special mortgage programs exist for newcomers within the first few years of arriving.

Eligibility

The key criteria for these programs include:

• Immigrated less than 5 years ago

You must have landed as a permanent resident within the last 5 years. The 5 year period starts from when you get your confirmation of permanent residence.

• Minimum down payment of 5%

This is the same requirement as standard mortgages. Anything less would make approval very difficult.

• Have a valid SIN beginning with 9

This specifies you are a newcomer and used in verification.

• 3 months of full-time employment in Canada

Must be able to prove full-time employment for minimum 3 consecutive months. The letter of employment is crucial.

• Good credit history from home country

If your Canadian credit file is limited, overseas credit records can supplement your profile. A reference letter from your foreign bank also helps.

Advantages

These programs offer newcomers certain advantages such as:

• More relaxed income requirements. Your foreign income may also be considered.
• Lower minimum credit scores, often around 680.
• Access to homes priced under $1 million.

However, you still need to prove you can service the mortgage from your Canadian income. So full-time employment is key.

Mortgage Options for Non-Permanent Residents

If you are not yet a permanent resident, getting a mortgage is difficult but not impossible. The requirements are stricter than for PRs.

If you hold a work permit and are employed full-time, you may qualify for:

• A mortgage if you make a 35% downpayment
• 5 year fixed term mortgages once you meet eligibility criteria

Other key requirements tend to include:

• Minimum 12 months continuous employment with the same employer
• Valid SIN beginning with 9
• Good credit history in Canada or overseas

Non-residents may also co-sign with a permanent resident or Canadian citizen.

Building Your Financial Profile as a Newcomer

Becoming mortgage-ready as a newcomer takes effort. Here are some recommended tips:

• Get at least one active credit account like a credit card when you land, and use it prudently to start reporting history.
• Similarly, consider a secured credit card to begin establishing credit.
• Avoid applying for too much credit at once as multiple hard checks can temporarily lower your score.
• Review your credit reports and address any inaccuracies immediately. Dispute any false negatives.
• Keep credit utilization low – using less than 30% of your total limit is best.
• Pay all bills on time like utilities in your name to demonstrate positive payment behavior.
• Build savings for your downpayment fund. Take advantage of tax-free savings programs.

With some diligence, newcomers to Canada can strengthen their financial status and work towards meeting mortgage eligibility requirements in the first few years.

Consulting Mortgage Professionals

Navigating the mortgage process as a new immigrant can be challenging. Seeking guidance from professionals is highly recommended:

• Mortgage brokers have expertise in newcomer programs. They can explore options across multiple lenders and present you with suitable options.
• Bank mortgage specialists can also advise if you plan to apply directly via a bank. Ask about their newcomer program offerings.
• Mortgage agents, usually independent professionals, can similarly help identify appropriate lenders.
• Real estate lawyers can provide legal assistance with reviewing paperwork and protecting your interests.
• Financial advisors can review your overall budget and financial health to ensure homeownership is viable.

The right advisor can guide you on building your profile, choosing suitable options, paperwork, and application process – thereby making the mortgage process much smoother.

FAQs on Mortgages for New Immigrants

1. Is there a minimum time requirement of living in Canada before I can get a mortgage?

There is no legal minimum residency tenure. However, for newcomer programs, you must have permanent resident status for less than 5 years. Most lenders also prefer seeing 1-2 years of local credit history along with stable employment, which indirectly creates a soft ‘minimum’ timeline that improves your chances.

2. Are mortgages available for vacation properties or investment properties?

Yes, in fact up to 4 residential properties can be financed via mortgages provided you meet eligibility criteria for each one. However, second/investment properties typically require larger down payments (commonly 20-35%). Speak to brokers who can guide you on vacation/investment property loans.

3. Will my foreign assets be considered for the mortgage application?

Sometimes yes, but it depends on the lender. Some consider foreign income and assets, while others focus only on your Canadian credit and finances. Brokers familiar with foreign asset programs can guide you better. You’ll likely need to provide extensive documentation on any foreign assets.

4. What is the easiest way to build a good credit score quickly after immigrating?

Having an active Canadian credit card (ideally for 6-12 months) with perfect payment history and prudent use is the fastest way to build score. Also become an authorized user on a Canadian friend/family member’s card. Avoid unnecessary credit checks.

5. Should I buy immediately or wait after immigrating?

Don’t rush into homeownership. Give yourself 1-2 years after arriving to settle down, build local credit history, and accumulate funds. Pay down debts, consolidate income, and adapt to expenses in Canada before taking on a mortgage.

6. What are some alternatives to conventional mortgages for immigrants?

Options include:

• Private mortgages or alternative lenders
• Co-applying with a co-signer
• Renting with option to buy
• Saving up and buying with cash
• Peer-to-peer lending

Discuss alternatives with an advisor to weigh the pros and cons for your situation.

7. What are some ways to speed up my eligibility for a mortgage?

• Having solid overseas credit history and assets
• Secured credit card to build Canadian credit fast
• Making a large downpayment if you have assets
• Getting a co-signer who is a PR or citizen
• Showing multiple sources of income if one is insufficient

Conclusion

New immigrants to Canada can access mortgage financing, especially if they attain permanent resident status. While standard eligibility criteria apply, special newcomer programs also exist to facilitate mortgage approvals in the first 5 years after arrival. Building a local credit history, securing stable employment, and making a sizeable downpayment are key to becoming mortgage-ready as a new immigrant. Consulting brokers or advisors well-versed in newcomer mortgages can help make the process easier. With prudent planning and advice, financing a home in Canada is very feasible for permanent residents.

References

1. Government of Canada – Mortgages for Newcomers. https://www.canada.ca/en/immigration-refugees-citizenship/services/new-immigrants/new-life-canada/housing/mortgages.html
2. CMHC – Guide for Newcomers to Canada. https://www.cmhc-schl.gc.ca/en/consumers/home-buying/newcomers
3. RBC Royal Bank – Mortgages for Newcomers to Canada. https://www.rbcroyalbank.com/mortgages/newcomers-to-canada-mortgage.html
4. TD Mortgage Specialist – Obtaining a Mortgage as a Newcomer to Canada. https://mymortgageinsider.com/obtaining-a-mortgage-as-a-newcomer-to-canada/
5. Anthem Mortgage Group – Mortgages for New Immigrants to Canada. https://anthemmortgage.ca/new-immigrants/#
6. CIBC – Helping newcomers with Canadian mortgages. https://www.cibc.com/en/personal-banking/mortgages/for-newcomers.html
7. FINTRAC – Guide to Mortgages for Newcomers and Non-Residents. https://www.fintrac-canafe.gc.ca/re-ed/accts-eng