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Buying A House without Canadian Credit History – A Guide for Newcomers to Canada
Canada welcomes hundreds of thousands of new immigrants each year. Newcomers to Canada arrive with hopes, dreams and ambitions, and are a key driver of Canada’s growth for the foreseeable future.
However, being a newcomer to Canada comes with many challenges. One of the many challenges for newly landed immigrants is buying a house here. There is a general myth that it is impossible for new immigrants to secure financing for a house if they don’t have solid Canadian credit history.
This is not true! Newly landed immigrants CAN apply for financing and be approved. It’s more difficult, yes. But it’s not impossible.
In fact, many mortgage lenders have programs specifically designed for new immigrants. This article can help shed light on what options newcomers to Canada have for securing financing to buy their dream house.
Who does this article apply to?
The information in this article applies to you if you meet all of the following criteria:
- You must have immigrated to Canada within the last 5 years.
- You must have Permanent Residence status.
- You must have a minimum of three months’ salaried, full-time employment in Canada, or a two-year history of Canadian self-employment
- The property you are buying will be your primary residence
Note: If you don’t meet these criteria, it may still be possible to secure financing for your home, but the information in this article may not apply. You should definitely contact a mortgage specialist to know your options!
If you have a Credit History from another country
Canadian lenders depend on independent Credit Bureaus to assess the credit-worthiness of applicants. The good news is that the largest credit bureaus in Canada – Equifax and Transunion – also operate in many countries across the globe.
If you are a newcomer to Canada who is arriving from a country where these two credit burueas operate, and you have 2 years of credit history to show, mortgage lenders will often consider your overseas credit history in lieu of Canadian credit history.
If you do not have acceptable Credit History from another country
In case the above option does not apply to you – for example, if you were immigrating from a country where the credit bureaus are not recognized by Canadian lenders – you still have a few options:
Alternative sources of payment history
Lenders may consider your application if you can furnish documents that show that you make your payments on time.
These documents are usually:
- 12-months rental payment history, confirmed via letter from landlord and bank statements
- One other alternative source (hydro/utilities, telephone, cable, cell phone and auto insurance) to be confirmed via letter from the service provider or 12 months billing statements
Mortgage providers will look at these documents to assess whether you are at risk of default or not. If you have a good history of payments, and you meet the other eligibility criteria, you may be approved for a regular mortgage!
Mortgage Default Insurance
If you don’t have the documents to prove a payment history, some lenders may still offer to finance your home purchase. However, you will have to pay for Mortgage Default Insurance to cover this risk of default.
You may be also be asked to make a larger than usual down-payment, usually around 20% or higher. However, if you have more than 2 years of full-time Canadian employment history, the lender may waive this requirement
35% Down Payment
Another option open to new Permanent Residents is to make a 35% down-payment on the value of the house.
In addition to the large down-payment, you will need to show that you have at least 12 months of monthly mortgage payments available to you in a Canadian bank account on the date you apply.
The funds must have been in your account for at least 90 days, and must be your own savings or non-refundable gifts from parents/family.
Although the high down payment can be difficult for most newcomers to manage, if you have a large pool of liquid assets available then this is probably your best option.
If you are a newcomer to Canada, we hope this article has helped you realize that there are avenues for you to pursue buying your dream house, even without a Canadian credit history.
However, there are many additional criteria to consider, such as maximum home value eligibility, mortgage rates, closing fees, and other eligibility requirements depending on your specific mortgage product. There are also incentives for first time home buyers that you might be eligible for.
We strongly recommend speaking to qualified mortgage specialists to understand your options better.
On a separate note, Condos are a great first-home option for newcomers, as they represent great value and generally will require lower monthly mortgage payments. Pre-construction projects are even better value for money!
Contact us if you’re looking for a Pre-construction condo in the Greater Toronto Area. We’ll be happy to assist you in finding your dream home!