TL;DR: Generally, the more "permanent" you are in Canada, and the better credit you have, the higher the chances you can be approved, and the lower the down payment you might have to make. The minimum down payment is 5% of the price up to $500,000, and 10% of any part of the price over $500,000, up to $999,999. If you are a permanent resident with good credit and a stable job, you may get get approved with 5% down. If you are not yet submitted a permanent resident application, have no credit or poor credit, and are not employed with guaranteed hours, you may have more difficulty getting approved and/or may need a larger down payment. Having 10% for a down payment is a big factor that can help you.
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New arrivals to Canada looking to get a mortgage may need to take some extra steps to obtain the financing. Depending on your status in the country, how much you have for a down payment, and your credit rating, you will likely need some extra documentation.
Permanent residents with a good credit rating may qualify for a regular mortgage. However, for borrowers who don’t meet all the requirements, there are new to Canada programs that can help.
The best way to make sure you get approved for a mortgage as a newcomer to Canada are:
Save up for a down payment
As you are building your credit rating and references in Canada, you can also be putting money aside for a down payment. For those with permanent residency status, you will need at least five percent of the purchase price. For non-permanent residents, you will have to pay at least 10 percent of the purchase price.
Build your credit
In Canada, your credit rating is very important when it comes to borrowing money. The stronger your rating is the more likely lenders will offer you good terms. There are ways to begin to improve your rating including getting a credit card and paying it off every month, pay all your bills on time, get a small loan and keep up with your payments, and find a stable source of income. If you haven't established a strong credit rating in Canada, you may also be able to use your credit rating from the United States, the UK, or Australia.
Lenders look for a minimum of two credit accounts (credit line, credit card, loan) that have been established for a minimum of 2 years, with on-time payment history. This is considered ideal, and will help you to be able to buy with the minimum down payment of 5%. If you don't have two credit accounts or one/both of them has not been open for 2 years, you can prove that you pay your obligations on time using an alternative method.
Alternative ways to show good credit
If you do not have a strong credit rating there are other ways to prove to a lender that you are responsible with credit and employment. This includes documents like a valid work permit or landed immigrant status, proof of income, proof of rental payments and support letter from landlord, proof you have paid your utility bills regularly, a reference letter from a financial institution, bank statements, and/or an international credit report.
Budget for mortgage default insurance
Home buyers in Canada that do not put down 20 percent or more towards the down payment are required to have mortgage default insurance. This protects the lender in case you default. To calculate your premium, take the home price and subtract the down payment. Take that sum and multiply by the insurance premium percentage. This gives you the insurance premium. In Canada, the insurance premium is added to the mortgage amount and you will need to budget for that additional cost.
We will guide you through the process
No matter what your situation is, we will help guide you through what steps to take and what paperwork you may need.