If you are new immigrant in Canada (or planning to become one in the future) – and want to buy your first home in Canada - buying your first home in a new country can be challenging and stressful – lets have an idea about the home buying process in Canada.
New Immigrant Criteria:
If you are a permanent resident or have a valid work permit and migrated in the past 60 months – you can qualify for a mortgage under the New to Canada Programs.
This program is offered in Canada by the three mortgage insurance companies Canada Mortgage and Housing Corporation (CMHC), Genworth Financial and Canada Guaranty.
Which city do you want to live in Canada?
Canada is a big country and there can be many city options for new immigrants to settle down in Canada. Take your time and do your own research before you discover the best one for you. There are many free resources and government funded programs available.
The cost of living can vary significantly among the Canadian cities. For bigger and popular cities like Toronto or Vancouver - you have to prepare yourself for expensive home prices as compared to other cities like Winnipeg, Edmonton or Regina.
Types of Housing in Canada
There are different types of housing buildings are available, depending upon price, space and type of building you can choose anyone from – a Condominium / Single Family Home / Semi Detached / Townhomes / Duples / Triplex
Build your credit
The first and foremost step in getting a mortgage in Canada to buy your first home in Canada is to build your credit.
A solid credit will help you get a better mortgage rate and could save you thousands of dollars in interest.
Here are a few tips:
- Open a bank account and apply for credit card
- Apply for overdraft facility with your bank
- Save and invest regularly
- Apply for a secured credit card (if not approved for unsecured card)
- Pay off all your bills in full and on time
If in case you don’t have credit history in Canada, you can use the international credit history or you can use alternate supporting documents.
Some of these documents can help in a smooth mortgage process:
- Proof of 12 months of rental payments and/or a confirmation letter from a landlord
- Payments receipts for utilities, telecommunications, insurance, etc.
- Reference letters from your bank from your home country
- Last 12 months bank statements
How much you can afford
Get pre-qualified to know as how much you can afford and amount of down payment required. Start out by using the affordability calculator tool:
The CMHC is a corporation owned by the Government of Canada with a mandate to help Canadians with the home buying process, so the CMHC affordability calculator is a reliable research tool for new home buyers.
Down payment requirements
The minimum down payment requirement in Canada is 20% of the property price but you can buy your first home (Property value ≤ $500,000) with as low as 5% down payment with the mortgage default insurance which usually gets added to the loan amount. If the Property value > $500,000 and < $1,000,000 - 5% down payment required up to $500,000, with an additional 10% down payment on the portion of the home value above $500,000.
Option 1
Property Price - $500,000
Required Down Payment Amount (at 20%) - $100,000
Loan Amount - $400,000
Option 2
Property Price - $500,000
Minimum Down Payment Amount (at 5%) - $25,000
Mortgage Default Insurance - $19,000
Loan Amount - $494,000
It’s always better to put the maximum down payment as it will save you interest cost.
Get Pre-Approved
Get pre-approved before you start house hunting as it will help you:
- save time and effort
- know your budget
- faster and smoother loan process
- gives you an edge over other buyers
For pre-approval, you can check with your current bank or with a licensed mortgage broker.
A mortgage broker is an independent licensed intermediary who brokers mortgage loans on behalf of individuals or businesses. In Alberta, Mortgage Brokers are licensed and monitored by RECA (Real Estate Council of Alberta) and AMBA (Alberta Mortgage Broker Association).
The main difference is a bank mortgage officer represents only the products their institution offers, while a mortgage broker is an intermediary who works with multiple lenders and is paid a referral fee by the lenders.
One thing to keep in mind is that getting pre-approved for a mortgage doesn’t guarantee that your final mortgage application will be approved.
Your pre-approval amount only represents how much your lender is willing to lend you, not how much you should spend. Always keep your budget in mind and factor in the closing cost.
The closing costs, ranging from 1.5 to 4% of the purchase price including the legal and administrative costs you will need to pay when your house closes along with the down payment.
Start house hunting
After pre-approval – you know your budget and now you can start your house hunting. You can choose to use the services of a Licensed Real Estate Agent or any of the online portal – the service is usually free for the buyers..
Some of the top real estate websites in Canada:
Real estate agents have local real estate industry / market knowledge and expertise to identify & handle the negotiation process with sellers. Be aware that there are risks involved in buying a home so it’s always better to have a real estate expert on your side.
Choose the house and the neighborhood keeping your immediate and future family needs in mind as moving & selling the home in the short term can be expensive.
Make an offer and home inspection
The offer to buy a home is a legal contract so make sure to ask all the questions and add conditions in your offer document. Work with an experienced real estate agent and a good real estate lawyer to ensure your best interests come first.
While your real estate agent is there to guide you, the more you know about the home-buying process, the smoother it will be.
After the offer being accepted the next step is the home inspection which is very important. You can choose to go for a basic home inspection or basic with pest inspection – as both are equally important. You can hire an independent home inspector.
Close the deal
Your Real Estate Lawyer will review your property and mortgage documents with you and make you sign all the legal papers with your deposit money or down payment & the closing cost.
On this closing date your real estate agent will get the keys after the title transfer to your name.
Welcome Home in Canada
Congratulations, You are a Homeowner now!
Now you’re ready to move in and get started on the next part of your journey in Canada.
Komal Vij is a licensed mortgage professional based out of Edmonton(AB.)
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