Canadian mortgage rules are very conservative and stringent. This is especially true when the down payment is less than 20% of the value of the home. In these cases, the qualification rules are controlled by our government and require the purchase of mortgage default insurance, such as Canada Mortgage Housing Corporation, Genworth, or Canada Guaranty.
Qualifying for a standard bank mortgage in Canada can be difficult without having established much credit yet. Developing credit takes time. This is a problem for recent landed immigrants in Canada, many of whom have excellent employment, assets, and past work history in another country.
Now, let’s keep in mind that Canada has, for many years, been a land of immigration and will continue to be. It is estimated that 17 million immigrants have come to Canada since 1867. Today, about 250,000 immigrants land in Canada each year. The number varies depending on the policy changes, financial climate, and world events.
Also, a Google search on the best countries to live in and Canada is frequently at or near the top of every list. It’s expected this will continue to drive Canada’s population growth in the future too. Many of the immigrants are well established educationally and financially. And many of these immigrants have the same aspirations for home ownership and providing the best for their family.
New to Canada Programs
Luckily, there is a program from the major default insurers for those that have obtained or their Permanent Residence status or in the middle of doing so. With this program, you may be able to qualify for a mortgage with as little as 5% down payment. The specifics of the program vary slightly from lender-to-lender as they write their own policy manual, however, here are some basic commonalities as it relates to this program.
The key to overcoming the shortage in credit history is to provide another form of comfort. Depending on the down payment size, it may be either an international credit bureau, history of making rental payments, utilities, cell phone bill, etc. Or it could suffice to have a letter of reference from a recognized financial institution or six months of banking statements showing normal but responsible activity.
Comments on requirements
Must be within 5 years of the date arrived in Canada. Must have a valid work permit or obtained landed immigrant status.
3 months of full time employment in Canada (exempt if transferred by a corporate relocation program
Maximum property value of $1 MM
Maximum amortization period of 25 years
Standard bank credit income and employment verification. Note, this is problematic for self-employed or those considered “self-employed” such as contract workers.
About the Author:
Ian Mucignat, CFA, is an independent mortgage agent at TMG The Mortgage Group. He graduated from Wilfrid Laurier University with a Bachelor of Business Administration, minoring in Economics and is a CFA Charterholder. Ian has worked in the mortgage industry since 2000 at lenders, banks, and brokerages. If you are purchasing, renewing, or refinancing your mortgage don’t hesitate to contact Ian directly for a free consultation.