I have had the pleasure of helping many new Canadians buy their first home in Canada. What I have learned is that new Canadians receive really mixed and inaccurate information about mortgages and financing the purchase of their first home. Each bank and lender has very specific rules about how they lend to new Canadians. They are complex products that even the banks own representatives often don’t understand. If a bank tells a new Canadian “no”, it may be a “yes” if you went to another lender.
In the broker world a client can use the lender with the rules that best fit their situation. You are more likely to find financing and, if you use a mortgage advisor with experience working with new Canadians, you receive accurate and more helpful advice. Here are the top 5 mortgage myths that I hear from new Canadians seeking a mortgage:
I need to have more than 5% down payment.
Not true. Just like Canadian citizens, a Temporary or Permanent Resident can purchase with as little as 5% of the purchase price as a down payment. To purchase with 5% down payment you must have lived in Canada for at least 12 months and have proof that you’ve paid rent and other bills on time.
I need to be in Canada for at least a year.
Not true. If you have 10% or more down payment, you can purchase once you have a full–time job that is permanent and non-probationary.
I can’t get a mortgage until I am a Permanent Resident.
Not true. Some banks won’t lend to Temporary Residents, but many will. Generally, you need a work permit that is one year or more with 6 months left before expiry.
I need two years of credit history to buy a house.
Not true. Lenders understand that New Canadians are just starting to build a credit score. But, if you have a credit score, it must show that you pay your bills on time. If you have less than two years history you can prove your credit worthiness in other ways. For example, you can provide 12 months history of rental payments and utility payments or a credit bureau from your former country of residence.
My mortgage interest rate will be higher.
Not true. Many lenders I work with offer their best rate to new Canadians.
New Canadians have a lot of options for home financing. Like all mortgage seekers, they should look for a lender with experience working with New Canadians. They should provide guidance on home financing rules in Canada, building and maintaining a Canadian credit score, and information on how to pay down a mortgage faster.