Moving to a different country can be a thrilling experience, but it can also be difficult for a newcomer to find the perfect mortgage solution. As a newcomer to Canada, you may face challenges obtaining a traditional mortgage due to the requirements of having a lengthy Canadian credit history established over time that many newcomers don’t have. 

There are mortgage options for newcomers that can help you achieve homeownership in Canada. Many banks and lenders have tailored mortgage programs to help newcomers qualify for a mortgage and purchase a home.

Key Takeaways

• Permanent residents who received residency 5 years ago or less can obtain newcomer mortgages. 
• Depending on the lender’s eligibility criteria, non-permanent residents with valid work or study permits may also qualify as newcomers. 
• If you’re considered a newcomer, you must meet all lender and insurer eligibility requirements for financing.

Who Qualifies as a Newcomer?

If you have immigrated to Canada in the past 5 years and have been granted permanent residency status or have confirmation of permanent residence from Immigration, Refugees and Citizenship Canada (IRCC), you qualify as a newcomer. 

In Canada, only individuals with permanent residence are eligible to qualify for a mortgage. However, depending on the lending criteria of the bank or lender, temporary or non-permanent residents may also be eligible. 

Who Qualifies for a Newcomer Mortgage in Canada?

To obtain a newcomer mortgage in Canada, you must meet specific criteria similar to any other type of mortgage. This includes meeting the eligibility requirements based on your immigrant status. If you meet the eligibility criteria as a new immigrant, you can get a mortgage for a primary residence as long as you meet the following requirements:

• Must have a permanent resident (PR) status
• Must have a SIN that does not start with 9
• Must have a full-time employment history in Canada
• Must have immigrated within the last 5 years.
• Must have an international credit report if you still need to establish a Canadian credit history.
• In addition to the international credit report, you must have 12 months of bill payments and rental history in your name if you don’t have a Canadian credit 
• history. 

To qualify as a temporary or non-permanent resident, you must have a valid work permit authorizing you to work in Canada and have a SIN number starting with 9. A study permit is insufficient for international students, so you must also have a valid work permit and source of Canadian income to be eligible. 

Documentation Required for a Newcomer Mortgage

The documents needed will vary depending on the bank or lender’s requirements. You may be asked to provide:

• Proof of income
• Bank statements
• Savings account statements
• Proof of downpayment
• International credit report
• 3-6 months of Canadian employment history
• Proof of rental payments and letter from landlord
• Service provider payment records (phone bills, utilities, insurance, etc.)
• Reference letter from a recognized financial institution from your home country

Steps to Obtain a Newcomer Mortgage in Canada

Similar to a traditional mortgage, newcomers must follow specific steps to secure a mortgage for their new home. 

Calculate Your Budget

Determining your financial limitations and what you can afford is the first step toward homeownership. The cost of a home in Canada varies greatly depending on the province and location. Knowing how much you can comfortably afford for your downpayment and ongoing mortgage payments can help you plan and find a home that fits your needs and budget. 

Begin Building Your Credit History in Canada

Building a Canadian credit history is beneficial and can help you qualify for a mortgage more easily. Your credit score, established gradually over time, plays a role in the chances you will get approved for a mortgage and can impact the interest rates you are offered. 

Learn How Credit History Works 

Your credit score ranges from 300 to 900, as determined by a scoring model and information in your credit report. Scores between 660-724 are considered good, with higher scores indicating more responsible credit behaviour and increasing your chances of being viewed as a reliable borrower. 

Learn What Affects Your Credit Score

You should start planning to get credit and build your credit history as soon as you enter Canada. The length of your credit history influences your credit score, alongside a track record of timely bill payments and effective debt management. Diversifying your credit and reducing the number of hard inquiries will also help you build and maintain a good credit score. 

Get a Credit Card

Getting a secured or unsecured credit card can help improve your chances of getting approved for a mortgage since this will help build your credit history. Many banks offer programs to help newcomers get set up with everyday banking and a credit card. It’s also recommended to have a second credit facility, such as a second credit card or post-paid bill. Spouses should also have their own credit card and post-paid bills in their name so they can be included in the mortgage application.

Get a Cell Phone

In Canada, many cell carriers report your phone bill payments to the credit bureaus. Many providers don’t require a credit history to get set up with a monthly plan, which is preferable over pre-paid options, which won’t help you build a credit history. 

Pay Bills on Time

The most effective way to build a credit history is by paying all bills on time. This improves your credit score and demonstrates reliability when a lender assesses you for a mortgage. Banks and lenders want to see that you can manage your credit facilities by making payments on time and in full. 

Build a Relationship With Your Landlord

Build a good relationship with your landlord so you may use them as a reference when getting a mortgage. You can also ask your landlord to report your rental payments to help you build a credit history. 

Get Preapproved

When you have everything in place and are ready to start searching for a property, obtaining a preapproval or prequalification can help by showing you the maximum amount you can borrow. This is not an approval but gives you an idea of how much you can afford to shop within your budget. 

Find a Home 

After determining your budget and completing a preapproval or prequalification, you can look for a home. Find a real estate agent who is informed on current market trends, especially in the location you have in mind for your home purchase. They can help you look at comparables and make a competitive offer once you’ve found a home you like.  

Credit for Temporary Residents

As a temporary resident, you can usually secure a credit card and mortgage products if you possess temporary foreign worker status, a valid work permit, and a Social Insurance Number (SIN) that begins with 9. To satisfy the lender’s criteria, it is generally necessary to have at least 1 year left on your Canadian work permit. You’ll find that credit and mortgage options are similar to those available for permanent residents. 

What is Canadian Credit History?

Building and maintaining a positive Canadian credit history is vital if you want to be considered for other financing in the future. Credit scores are determined based on several weighted factors, including payment history, used vs available credit, credit mix, and length of credit history.

In Canada, Equifax or TransUnion can provide your credit report, or you can obtain your report for free from most major financial institutions. This report includes details about your credit score, credit accounts and repayment history in Canada. 

Payment History

This is a complete picture of all credit accounts and how well you have managed them in the past. This will address the lender’s concerns about whether you will make timely payments and can responsibly handle debt. This history will also include information on any missed payments or anything that has ever been sent to collections. 

Credit Utilization

This ratio compares the amount of credit you have used against your available credit limit. To calculate your credit utilization ratio, divide your total credit balances by your total credit limits and multiply by 100. Keeping this ratio at or below 30% is recommended to maintain and improve your credit score. If you use more than 30% of your available credit consistently, you can request higher credit limits or accept any preapproved limit increases offered. 

Credit Mix

This refers to your various credit accounts, like credit cards, loans, and mortgages. A more diverse mix of credit products can positively impact your credit score. However, you must use this credit regularly and pay it on time.

Credit History Length

The longer your credit history is, the more it can positively influence your overall credit score. Avoid closing credit cards, especially ones you have held for longer since the amount of time you have held credit matters. If necessary, consider requesting a switch to a different card from the same issuer instead of closing cards. 

Mortgage Options for Newcomers to Canada

Many major Canadian banks and lenders offer mortgage options for newcomers buying their first homes. These programs are intended to assist newcomers with limited Canadian credit and work experience in securing financing. 

Scotiabank StartRight

The Scotiabank StartRight program assists permanent and temporary residents who have lived in Canada for 5 years or less. To be eligible, the downpayment must be from one’s own funds and cannot be gifted, and you must meet all standard credit requirements, residential mortgage standards, and maximum loan amounts. If the LTV ratio is over 65%, mortgage default insurance may be required.  

TD New To Canada 

TD’s New To Canada can help permanent residents and foreign workers obtain mortgages. To qualify as a permanent resident, you must have obtained permanent resident status within the last 5 years and have at least 3 months of full-time Canadian employment. Mortgages require at least a 35% downpayment, or you will require mortgage default insurance. 

To qualify as a foreign worker, you must have relocated to Canada within the last 2 years and have at least 3 months of full-time Canadian employment. Mortgages require at least a 20% downpayment, or you will require mortgage default insurance. 

CIBC Newcomer to Canada Program 

CIBC’s Newcomer to Canada provides mortgage solutions for newcomers with limited or no credit history or foreign workers with valid work permits. To qualify, you must have been a permanent resident in Canada for 5 years or less or hold a valid work permit as a temporary resident for at least 12 months. Applicants must meet the minimum requirements for downpayment, credit approval, income verification, and other conditions stated by the bank.

RBC Newcomer Advantage 

RBC’s Newcomer Advantage is open to permanent residents in Canada for less than 5 years. Temporary foreign workers, foreign students, and foreign income earners may also be eligible. All the bank’s criteria for eligibility and credit must be met, and proof of entry into Canada, along with supporting documents such as a work permit/visa and permanent residence card, must be provided.

BMO NewStart

BMO’s NewStart program offers mortgages to permanent residents who immigrated to Canada within the last five years or hold valid work permits. To be eligible for mortgages as a newcomer, you must meet the lending criteria set by the bank.

Mortgage Default Insurance for Newcomer Mortgages

The 3 mortgage default insurers in Canada have programs for newcomers with limited credit history in Canada. Mortgage default insurance assumes the risk from banks and lenders when you put down the 5% minimum downpayment. 

CMHC Newcomers is available to permanent and non-permanent residents without any mandatory length of residency.

Sagen’s New to Canada Program is open to borrowers with a valid work permit or permanent resident status in Canada. Applicants must have worked full-time in Canada for at least 3 months to be eligible. However, those relocating under a corporate relocation program may have the employment requirement waived.
Canada Guaranty Maple Leaf Advantage is open to borrowers who immigrated to Canada within the past 5 years and have obtained permanent resident status, landed immigrant status, or hold a valid work permit. Applicants must have at least 3 months of full-time employment in Canada to be eligible. However, this employment requirement can be waived if the borrower is part of a professional employee relocation program.

Frequently Asked Questions

Final Thoughts 

Every year, newcomers are drawn to Canada, and many are determined to settle down and purchase a home in their adopted country. However, without credit and work history in Canada, meeting the standard criteria for obtaining a mortgage can be difficult.

Newcomers can secure a mortgage. Banks and lenders know the challenges immigrants face when obtaining a mortgage. If you are a new resident of Canada and looking to buy your first home, reach out to our mortgage professionals for personalized advice.