For new immigrants in Canada, buying a home is a big goal. Homeownership ensures you have a place to live and allows you to build equity. As your home increases with value, you will have an asset you can use in many ways.
If you are a newcomer in Canada, there are some obstacles to buying a first home. Immigrants may not have a credit history and may have a shorter employment history and may be facing a home buying process different than what they are used to in their home country. The process of buying a home as a new arrival is a long one and you can navigate the mortgage and purchase by taking the following steps:
1) Determine how you will pay for your home
Some immigrants to Canada who wish to buy a home come into the country with enough money to purchase a home outright with cash. If this is the case for you, buying a home with no mortgage may be faster but you will want to consider the tax implication of this purchase. Speak with a financial and tax professional to determine whether this is the right move for you. Make sure you have been in Canada for long enough to have at least 12 months of credit history and any money you plan to use towards your home has been in Canada for at least 30 days.
2) Start working on your employment and credit history
If you need a mortgage for your home, start by establishing your work history as soon as possible by getting a job. At the same time, start working on your credit score. Your credit score is a three-digit number which shows mortgage lenders how much of a credit risk you are. You can improve your score by paying your bills on time and by getting a low-limit credit card and paying it off on time each month.
3) Get familiar with the home-buying process
Buying a home traditionally means saving for a down payment and getting your credit score high and then working with a real estate agent to place an offer on a house. You will need to get house inspections, do research on different housing markets and get ready for the responsibilities of homeownership. The Canada Mortgage and Housing Corporation has a guide for newcomers to help you navigate the mortgage and home purchasing steps you need to follow. The guide is available in multiple languages.
4) Determine how much you can afford
Your housing budget should take into consideration any mortgage costs, insurance, debts you may have, repair costs, heating and utilities, and more. Consider your total monthly income; your housing costs in total should ideally not be more than 30-32% of your monthly income.
You can use an online calculator to determine how much you can afford, based on your income, debts, and expenses.
5) Start saving for a down payment
Your down payment can be 5% to over 20% of the total price of the house you wish to buy. In general, the higher your down payment, the more likely you are to get a good interest rate on your mortgage and the higher the chance of getting a home loan. If you pay less than 20% of the total house price and the mortgage covers the rest, you will need to pay extra for mortgage loan insurance.
6) Get pre-approved for a mortgage
You can get a mortgage from a bank or credit union as well as from other financial institutions. Some banks and organizations even have programs to allow newcomers to Canada to buy a house with as little as 5% down payment.
Make an appointment to visit the financial institution of your choice to get pre-approved for a mortgage. Be sure to bring all the financial statements your bank or credit union requires. Getting pre-approved means the bank agrees you qualify for a mortgage. This process ensures you have financing in place in case you do find a home and it gives you a sense of how much the bank would be willing to lend you for a home.
7) Research markets and homes
For an immigrant, home buying takes a lot of research. Since you will own your home for years, you want to make sure you make a good investment. Read reports and news articles about different neighborhoods and look at listings of houses to get a sense of how much homes in the area cost. Take a look at schools, crime rates and employment opportunities in the area, as these can impact home prices and how much your home’s value will grow with time.
8) Find a real estate agent
A real estate agent can help you find a house and can help you with the legal and paperwork part of purchasing. Look for a real estate agent who is licensed with the real estate council of the province where you wish to buy and is transparent about costs and fees. Look for someone you feel comfortable with; you may even want to find someone who speaks your native language.
9) Get ready to make an offer
Once you have the financing or money in place and are ready to buy, you can place an offer on a home. This means you indicate to your real estate agent how much you want to pay. In some markets, there are bidding wars, meaning multiple people will make an offer and the homeowners will choose who they sell to. If bidding occurs, the home may sell for more than the asking price.
Are You Ready to Live in Canada?
If you are ready to immigrate to Canada to buy a home here, you may wish to apply for permanent residency or citizenship. It is often easier to buy a home if you at least have permanent residency.12 If you would like to immigrate to Canada, Immigration Direct has kits to help you apply and a free blog with useful information. Be sure to check out all our helpful information today!