Buying a home as a newcomer to Canada? Here’s how to prepare

Are you thinking about buying a home as a newcomer to Canada? If you are getting ready to make this purchase for the first time, you may be feeling some combination of nerves and excitement. This is completely normal! The good news is that as mortgage brokers, we are here to give you the support and advice you need to navigate this process. To start, here are some important tips to help you prepare yourself for this journey!

Familiarize yourself with the mortgage system

The mortgage industry can vary from place to place. One of the first things you should do is take some time to learn a bit about Canada’s mortgage system and how it works. This will help you feel more comfortable and confident in the market. As a result, you are more likely to have a positive mortgage experience.

The good news is you don’t need to become an expert on the mortgage industry overnight! The mortgage professionals you work with will have all the details you need to succeed. However, it’s still a good idea to master some basic knowledge. For example, you should take the time to learn about the required down payment amounts, mortgage default insurance, and current market trends. You should also familiarize yourself with the difference between fixed-rate and variable-rate products. It never hurts to gain a basic understanding of the housing market before you enter it, whether you are a newcomer or not!

Secure a mortgage pre-approval

Another essential step for all home buyers is the process of getting a mortgage pre-approval. This is a situation where a potential mortgage lender gives you an estimate on what you might be able to afford in today’s market. It does not guarantee financing, but it helps buyers understand where they land. This is important to ensure you are viewing properties you can afford, and giving yourself realistic buying goals. 

Pre-approvals are critical for everyone, but they can be especially helpful for buying a home as a newcomer to Canada. They give you a sense of where you stand in the market, and what you can comfortably afford to pay for. Homeownership shouldn’t be an overly stressful aspect of moving to Canada, and pre-approvals help make the process as simple as possible.

Build a strong credit profile

Strong credit is one of the most influential factors in terms of securing a mortgage on a house in Canada. If you are new to the country, you may not have built a very lengthy credit profile yet. How can you begin this process?

Once you have a credit card and a bank account, you have the tools you need to start building your credit. Make a point of using your credit card each month up to a certain limit (we recommend around 35 per cent of your available credit). Then, be sure to always pay off your credit card bill in full each month. This will start building your reputation as a creditworthy borrower. After a few months, you should start to see a nice trend that lenders are willing to work with. Be sure to keep all bills paid off and don’t leave any outstanding expenses owing at the end of the month. The better you are at making timely payments, the higher your chances of securing a mortgage.

Nail down your down payment

Down payment requirements in Canada are easy enough to understand! Your required down payment amount depends on the purchase price of your future home. Homes up to $500,000 only require a five per cent down payment. Homes between $500,000 and $1 million require five per cent on the first $500,000, and 10 per cent on the rest. If you buy a home that is $1 million or more, you must pay a 20 per cent down payment on the entire amount.

Your job is to determine how much money you have saved, and how much you want to spend on your down payment. Opting for a smaller down payment can get you into the market quicker, but it comes with a larger mortgage and the necessary purchase of mortgage default insurance. On the other hand, a large down payment means you will have a smaller mortgage, but it can take longer to save. Take the time to consider what option may be best for you, and how much you want to spend on your down payment versus the mortgage itself.

Understand what documents may be needed

When buying a home in Canada, there are certain documents that everyone will need to provide. Lenders want to know that you have a stable income and the ability to make your mortgage payments. They will ask to see things like proof of employment and pay stubs, a credit report, and a bank statement showing your down payment. If you have a Canadian tax return, this will also be required. As a newcomer to Canada, you will also need to provide proof of residency.

Depending on how long you have been in Canada, you might not have all the traditional documents. Your mortgage broker can help you access the right lender who can provide you with the perfect mortgage product for your situation.

Work with professionals who understand your needs

Above all, the best way to go about buying a home as a newcomer to Canada is to get in touch with a mortgage broker early. We work with all types of clients from different backgrounds and situations. We can walk you through the process from start to finish, making sure you feel confident the entire time. While the home buying experience can feel stressful and intimidating, we are here to make it as simple as possible for you. When you are ready to kick off your home buying journey, we are ready to help you begin!

If you have any questions about your mortgage, get in touch with us at Clinton Wilkins Mortgage Team! You can call us at (902) 482-2770 or contact us here.