Saturday, June 11, 2011

New To Canada Mortgage

In 2010 there was approximately 280,000 new immigrants to Canada. Most of which are hoping for a new life and will be productive, some are simply looking for a better place to spend their money or have a better home for thier children. Some have received transfers from their employers.

When buying a home in Canada with less than 20% down you need to have mortgage default insurance which protects the bank, not you in the event that you fail to make your mortgage payments. If you are new to Canada there will be insurance premiums no matter how much you put down, it just depends on your credit strength. These premiums can be as low as 0.50% for 65% Loan to value (35% down). Some lenders will waive these for permanent residence status with significant established Canadian credit.

Canadian mortgage insurers do allow for new Canadians to purchase homes with as little as 5% down. Qualifying is actually quite simple. You arrived in Canada within the last 36 months, have three months worth of work history and have permanent residence or landed immigrant status to purchase with 5% down and 12 months worth of credit. If you are transferred from your employer to Canada and meet all other criteria as well as a letter from your company, you can purchase a home the day you arrive in Canada. Also if you are a non permanent resident with a work permit you will require a minimum of 10% down. If you have diplomatic immunity then sorry about your luck, you are not getting an insured mortgage in Canada.

While you are only required to be working for 3 months you are required to have at least 12 months worth of credit. It may be difficult to recieve credit as soon as you arrive here, but the insureres will accept 12 months worth of phone bills or other utility bills that are paid in full on time. Make sure you have at least two 12 month records. Rent payments from a landlord as well a letter from your previous financial institution on a case by case basis. With 10% down or more we may get away with 6 months worth of bank statements or a letter from your Canadian banking institution that states you are in good standing.

If you are arriving from the United States an American credit bureau is acceptable, from any other country it is case by case. You can purchase in as little as three months if you have acceptable forms of documentation to support your case. If you show up on the shores of Canada and are working but cannot support your credit worthieness you will have to earn that once you get here. If you plan on moving to Canada bring your credit bureau from your home country with you, it may not be accepted for a mortgage but it may help you in getting a jump start to recieve credit in Canada. A credit bureau in Canada is only good for 30 days, so see if you can have easy access to ordering another one when you need it.

The 5% down must come from your own resources and in special cases a gift from a family member. If the funds are coming from another country do your best to prove where the source is from. Strict down payment rules apply to show the funds did not come from the proceeds of crime or terrorism.

For self employed and new to Canada it is very difficult to qualify. You must be able to verify your income. Self employed in Canada are required two years worth of income tax to be filed and taxes paid. If you have 35% down you will have no problem getting a mortgage, but less than that will require you to have a good arguement as to why you are worthy of a mortgage. The mortgage will not be insured and therefore the lenders see it as a risk. The stronger you are the better interest rate and terms you will recieve.

It is very important to show financial and credit strength. If you call up a bank or a broker when new to Canada and say you want a mortgage but have nothing to show that you are not a risk, then you are a risk, even if you feel your the most responsible person. Document everything and make sure you use a mortgage broker who is familiar with new to Canada progams. Make sure you ask if there will be a fee, if they say yes then tell them to piss off, we are paid by the lending institution. Mortgage brokers who charge for this service are simply taking advantage of people who do not understand the Canadian mortgage system.

Not all the rules for the mortgage world in Canada are written in stone and there can be some exceptions. Different lenders may also have their owns rules for qualifying and actually argue to the insurers that they want to process a particular deal or decide a client is strong enough and not require the mortgage to be insured. The relationship a mortgage broker has with lenders and insurers can really help your cause. Basically there is two levels of approval, first we find a bank to take your mortgage then they find an insurer or we request which insurer the lender sends it to. Use a broker who will go to bat for you and get you what you are entitled to under Canadian regulations.

This post is a little longer than I wanted it to be, but there is a lot to discuss. I could go on for a few more pages. If you are planning on coming to Canada it is good to contact me ahead of time. If you are already here then what are you waiting for?

Prior to looking for a home, the very first step is talking with a mortgage broker and getting yourself pre-approved.

If you have any questions please do not hesitate to email, call or comment. Comments are welcomed and encouraged.

Ron Miller

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