New Canadians’ Mortgage Guide06 Mar 2019
Starting a new life in Canada? Buying your first home is one of the best ways to put down roots and establish yourself in your new country. According to Genworth Canada’s 2017 First-Time Homeownership Study, a full 19% of first-time homebuyers were born outside of Canada, 10% of whom arrived in the past decade. Wondering how to start your journey to homeownership? Read on for our New Canadians’ Mortgage Guide.
Step 1: Study your options
Responsible homeownership is about buying a home you can afford, so for starters, take a look at our library of articles about affordability. Read up on topics such as how to choose the right home for your budget and learn about financing options for new Canadians.
Share the knowledge with your family, too. Our New to Canada microsite offers content in Chinese, Punjabi, Korean, Spanish and French.
Step 2: Establish credit history in Canada
Banks and other lenders look at your credit score to determine your level of financial responsibility. Your credit score is determined by your financial behaviour: Do you pay your monthly bills (including cell phone) on time, or have you skipped payments? Do you have credit cards or lines of credit, and if so, how much do you have left to access?
TIPS: Never skip a payment (always pay at least the minimum), and keep your credit utilization– the amount of your credit limit that you actually use–low. Don’t carry a balance over 30% of your credit limit; the lower the better.
The better your credit score, the more likely you are to be approved for a mortgage – and at a more favourable interest rate.
Because your Canadian credit history starts in Canada (foreign credit history isn’t taken into consideration by lenders), it’s important to establish positive patterns as soon as possible:
- Open a savings or chequing account at a Canadian bank or credit union, and use it for your payroll deposits, as well as withdrawals and transfers.
- Apply for a small loan or credit card. Make some purchases each month, and pay off the balance or make regular payments each month, to prove you are responsible with credit.
Step 3: Build your savings
Use a separate high-interest savings account, investment account or set aside funds in a TFSA (tax-free savings account) to build toward your home down payment. You can purchase a home with as little as 5% down, but in high-demand cities like Vancouver, Calgary and Toronto, a competitive real estate market means it can take longer to save for an adequate down payment.
TIP: First-time homebuyers can borrow RRSP funds to help towards a down payment under the federal government’s Home Buyers’ Plan.
Step 4: Research neighbourhoods and communities
While you’re saving and working on building your credit history in Canada, take some time to daydream! Checking out neighbourhoods and communities where you might like to live is a great way to stay motivated. It can also help ensure that you have a smooth transition to your new home.
Think about where you’d most like to live. Would you prefer the excitement of a big city, the quiet family vibe of the suburbs, or the natural splendour of the rural countryside?
Research the amenities you’ll need, whether that’s public transportation, walkable communities, schools, places of religious worship, shops and other priorities.
Consider making weekend excursions to potential communities to explore the local amenities. Since Sunday afternoons are a traditional time for open houses, think about scheduling your visits so you can squeeze in a couple of house or condo tours, too.
Step 5: Start assembling your real estate team
Finally, as you get closer to house-hunting time, start building your real estate team. Ask friends, colleagues and neighbours for recommendations on professional REALTORS®, real estate agents, mortgage specialists, real estate lawyers and home inspectors.
It’s important to hire professionals who are familiar with the real estate market in your preferred neighbourhood or community. Interview a few candidates and research customer reviews online, so you can find the right pros to help you embark on your journey to homeownership in Canada.
Check out these other Homeownership.ca features geared at newcomers planning to buy their first home: