New to Canada? How to Qualify and Get a Mortgage in 2025

Steps to Homeownership for Newcomers

Canada is renowned for its welcoming nature and diverse culture, making it an attractive destination for newcomers from around the world. One of the most significant milestones for many new immigrants is buying a home! Qualifying for and obtaining a mortgage can appear daunting and confusing, but with the right information and preparation, it is entirely achievable.

You will see that there a few things you need to keep in mind, such as Credit history/Credit score and Down payment to begin with.

Here is what you need to know to qualify for and secure a mortgage in Canada:

The Canadian Mortgage System

The Canadian mortgage system might differ from what you are used to in your home country. In Canada, mortgages are typically issued by banks, credit unions, and specialized mortgage lenders. These financial institutions offer various mortgage products tailored to different needs and financial situations.

Types of Mortgages

There are two main types of mortgages in Canada:

1. Fixed-rate mortgages: The interest rate remains constant throughout the mortgage term, providing stability and predictable payments.
2. Variable-rate mortgages: The interest rate fluctuates with the market conditions, potentially offering lower initial rates but with the risk of rate increases.

Steps to Qualify for a Mortgage

1. Establishing Credit History

Credit history is crucial in Canada as it demonstrates your ability to manage and repay debts. Newcomers often face challenges due to a lack of Canadian credit history. Here are ways to build your credit:

• Obtain a secured credit card: This type of credit card requires a security deposit and helps you build credit.
• Pay bills on time: Consistently paying your utility, phone, and internet bills can positively impact your credit score.
• Apply for a car loan: Be cautious as this type of loan has the potential to slightly negatively impact you if you are not careful. If you’re purchasing a vehicle however and it’s necessary to finance it or lease it, securing a small loan can also help establish your credit history.

2. Down Payment

The down payment is the initial amount you pay towards your home purchase. In Canada, the minimum down payment depends on the home’s purchase price:

• Less than $500,000: 5% of the purchase price.
• $500,000 to $999,999: 5% of the first $500,000 and 10% of the remaining amount.
• $1 million or more: 20% of the purchase price.

Saving for a down payment demonstrates your financial discipline and reduces the amount you need to borrow.

IMPORTANT NOTE: Your credit history and score also can affect the amount needed for a down payment. I your credit score is good, then you can access lenders that will allow you to have only 5% as a downpayment. If your credit score is poor then you are limited to 20% down payment or more. (Click here more information on credit scores)

3. Required Documentation

Lenders will require various documents to process your mortgage application. Typical documents include:

1. Proof of income: Pay stubs, Employment Letters, or tax returns. If you have your own business, then either Articles Of Incorporation or Business License.
2. Proof of down payment: Bank statements showing the source of your down payment.
3. Credit history: Credit reports from your home country, if available.
4. Identification: Passport, Permanent Resident Card (P.R.), or Work Permit.

4. Get Pre-Approved

A Mortgage Pre-Approval Certificate provides an estimate of how much you can borrow and the interest rate you qualify for. It shows sellers that you are a serious buyer and can expedite the home-buying process. You can get a Pre-Approval Certificate from a Licenced Mortgage Agent or Mortgage Broker.

IMPORTANT NOTE: It is always advised that that you have a 3-to-5-day Condition of Financing when you put an offer for any home!

5. Choose the Right Lender

It’s essential to compare different mortgage options from multiple lenders to find the best terms and rates. Consider working with a Mortgage Agent or Mortgage Broker who can help you navigate the various offers and find the most suitable mortgage for you and your loved ones.

Qualifying for Special Programs

Canada offers several programs specifically designed to help newcomers qualify for mortgages:

1. Newcomer Mortgage Programs

Many Lenders have special mortgage programs for newcomers, allowing you to qualify with limited or no Canadian credit history. These programs often consider your international credit history and other factors such as employment stability and savings and investments.

2. First-Time Home Buyer Incentive

The First-Time Home Buyer Incentive is a government program that helps reduce your monthly mortgage payments without adding to your financial burden. The government provides 5% or 10% of the home’s purchase price in a shared equity mortgage, which you repay when you sell the home or after 25 years.

3. RRSP Home Buyers’ Plan

This plan allows you to withdraw up to $35,000 from your Registered Retirement Savings Plan (RRSP) to use as a down payment, tax-free. You must repay the amount within 15 years.

Final Tips for Success

• Consult with Experts: Engage a Real Estate Agent familiar with helping newcomers, as well as a Mortgage Agent/Broker to guide you through the mortgage process.
• Consider All Costs: Remember to factor in closing cost expenses when budgeting for your new home. Some of these are insurance costs, Lawyer fees, property taxes, Lender fees and service/administrative fees.
• Plan for the Future: Choose a mortgage that aligns with your long-term financial goals and consider potential changes in your financial situation.

Conclusion

While the process of qualifying for and obtaining a mortgage in Canada as a newcomer can be challenging, it is well within reach with the right preparation and understanding. By building your credit history, saving diligently for a down payment, and leveraging special programs designed for newcomers, you can achieve the dream of homeownership in Canada. Take the time to research and consult with professionals, and you will be well on your way to securing a mortgage and finding your new home in this beautiful and welcoming country.

Please don’t hesitate to reach out to me at (437) 869-2864 if you have more questions or want to discuss your case in person. I’m here to help!

Happy House-Hunting!

Chris Lykidis

Mortgage Agent Level 1

License# M18001416

Email: lykidislending@gmail.com