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Moving to a new country comes with a long list of firsts: a new job, new neighbourhood, new bank accounts—and, eventually, perhaps a new home.
But there's a frustrating situation many newcomers to Canada encounter when they start thinking about buying.
You may have a good job. You may have substantial savings. You may have managed your finances responsibly for years. But much of that financial history happened somewhere other than Canada.
Does that mean you have to spend years building Canadian credit before you can buy a home?
Not necessarily.
The good news is that Canada has mortgage programs designed to help newcomers become homeowners, even when they haven't had much time to establish themselves financially in their new country.
The Canadian Credit History Problem
When you apply for a mortgage, lenders want to understand how reliably you manage financial obligations. For someone who has lived in Canada for years, a Canadian credit report provides much of that history.
A newcomer may simply not have had enough time to build one.
Fortunately, a limited Canadian credit history doesn't automatically mean you can't qualify for a mortgage.
Mortgage insurers and lenders may consider other ways of demonstrating creditworthiness. Depending on your circumstances, that can include an international credit report, banking history from your country of origin, Canadian bank statements, or a history of consistently paying expenses such as rent, utilities, phone bills and other regular obligations.
In other words, the financial habits you established before arriving in Canada may still matter.
Can Newcomers Buy With a 5% Down Payment?
In some circumstances, yes.
There are mortgage options available to qualified newcomers that allow the purchase of a home with a down payment starting at just 5%.
For an eligible home priced at $500,000 or less, the minimum down payment can be 5%. Above $500,000 and below $1.5 million, the minimum is 5% of the first $500,000 plus 10% of the remaining amount. Homes priced at $1.5 million or more require at least 20% down. A lender may require a larger down payment depending on your circumstances.
For example, on a $400,000 home, a 5% down payment would be $20,000. That's considerably less than the $80,000 you'd need for a 20% down payment.
Keep in mind that mortgages with less than 20% down generally require mortgage default insurance, which adds to the overall cost of borrowing.
Of course, not everyone automatically qualifies. Your income, employment, existing debts, credit history, immigration status and the property you're purchasing can all affect your options.
The source of your down payment matters, too. Savings are commonly acceptable, and some programs allow financial gifts from qualifying family members. Other sources of funds may be subject to additional restrictions.
The important thing to understand is that you may have more options than you realize.
Can You Buy a Home in Canada Without Permanent Residency?
If you're new to Canada, your immigration status can affect your ability to purchase a home.
Under the federal Prohibition on the Purchase of Residential Property by Non-Canadians Act, certain non-Canadian buyers are restricted from purchasing residential properties.
However, the rules include important exemptions.
Canadian citizens and permanent residents are not subject to the prohibition. Certain people living and working in Canada on valid work permits may also qualify, as can some international students and other individuals who meet specific requirements.
Location matters, too. The restrictions generally apply to residential properties within Statistics Canada's designated census metropolitan areas and census agglomerations, including the Edmonton area. Properties outside those boundaries are exempt from this federal prohibition. The specific property's location must be checked; being in a rural municipality does not automatically mean it is exempt.
The important distinction is that qualifying for a mortgage doesn't automatically mean you're legally eligible to purchase a home.
Before beginning your home search, it's worth confirming both your purchasing eligibility and your financing options. A qualified real estate lawyer can help clarify how the legislation applies to your circumstances.
For additional information, visit the Canada Mortgage and Housing Corporation's guide to the federal foreign-buyer prohibition.
Your Paper Trail Can Be Surprisingly Important
If you're relatively new to Canada and homeownership might be in your future, start keeping good financial records now.
Bank statements, proof of rent payments, utility bills, employment documentation and records from financial institutions in your previous country may all become useful when a lender is trying to establish your financial history.
It's also a good idea to begin building your Canadian credit history as soon as practical. Opening a Canadian bank account, using a credit card responsibly and making payments on time can help establish a financial track record.
You don't necessarily need years of Canadian credit history to qualify for a mortgage, but having some history certainly doesn't hurt.
This is one of those situations where being organized ahead of time can make a significant difference.
Get the Financing Sorted Out Before the House Hunting
This is good advice for any buyer, but it's particularly important when you're new to Canada.
Mortgage requirements aren't identical from one lender or mortgage insurer to another. A situation that doesn't fit neatly into one lender's guidelines may have options elsewhere.
Before we start looking at homes, I generally want my buyers to have a clear understanding of three things:
What they can comfortably afford. Just because a lender approves a certain amount doesn't necessarily mean you should spend it all.
What financing they're likely to qualify for. Understanding your mortgage options early helps establish a realistic price range.
What documentation or conditions could affect their purchase. Identifying potential issues before making an offer can help avoid unnecessary complications later.
This preparation allows us to search for homes within a realistic budget and, just as importantly, prepare an offer with financing conditions and timelines that make sense.
Buying a home is exciting. Discovering an unexpected financing problem after you've fallen in love with a property? Not so much.
A New Country—and Eventually, a Home of Your Own
Establishing yourself in Canada takes time. Building a Canadian credit history does too.
Homeownership, however, doesn't necessarily have to wait until you've accumulated years of Canadian financial history.
Whether you've recently arrived in Alberta or have been here for a few years, understanding your options is an important first step.
And if you're considering buying a home in Spruce Grove, Edmonton, Stony Plain, St. Albert or the surrounding communities, I'd be happy to help.
I've been helping people buy and sell homes throughout the Edmonton region since 2002, and I understand that everyone's situation is different. I can help you navigate the local housing market, understand the buying process and connect with qualified mortgage professionals who can assess your financing options.
The first step doesn't have to be making an offer. Sometimes it's simply finding out what's possible.
Jason Hafso, REALTOR®
MaxWell Challenge Realty
780-964-7335
Please note: Mortgage qualification depends on individual circumstances, lender and mortgage insurer requirements, and applicable Canadian laws. Foreign-buyer restrictions and exemptions may change. Consult qualified mortgage and legal professionals to confirm your eligibility before purchasing.
Feature photo: Gustavo Fring / Pexels. Used under the Pexels License.