How to Buy a Home as a New Immigrant in Canada?

Are you new to Canada & dreaming of buying a house? Well, you can.

Now that you are in Canada & wondering whether or not you can buy your first Canadian home is even possible. Immigrants to Canada are permitted by the government to purchase a home, even if they’ve just landed in the country. 

When you are trying to figure out the homeownership rules & trying to adapt to Canadian society – all things can get overwhelming. If you are planning to move to Canada through Express Entry Canada 2024 & thinking of buying a home, here is a comprehensive guide on buying your first home in Canada as a new immigrant.

Who is eligible to purchase a home in Canada?

Though both PRs & non-PRs are allowed to buy a property they have to meet specific conditions. 

• Proof of Funds

You’ll need to provide proof that you have enough funds to make a down payment for the house. The government of Canada expects you to hold the down payment amount for a minimum of 3 months. If the money is coming from outside Canada, you must possess it & be able to provide its source.

• Have a Good Credit Report

Make sure you have a bank account + a good credit report – with a score of at least 680. Your credit score is built on your credit card history & as long as you are using it responsibly – paying your dues on time each month - your score will build incredibly. 

No matter if you have a great credit score back home, you still need to build one in Canada. If you don’t have any credit history in Canada, show that you have a good payment record & you are creditworthy. For that, submit proof of your bill payments on time for public accounts like electricity, for the past 12 months.

• Additional Documents

You may also need to submit more documents for the authorities to evaluate your credit report & debit ratio,  particularly if you’ve debts outside the country. 

Update: On January 1st, 2023, a new law was imposed that placed certain restrictions on non-Canadians to purchase residential properties in Canada for 2 years. The federal government has introduced this to control the purchasing of residential properties by foreign investors – to stabilize the real estate market in Canada.

However, this new law does not cover the following: 

• Diplomatic or consular officers

• Temporary residents on a study permit who meet certain strict conditions

• Temporary residents on a work permit who meet strict conditions

• Temporary residents who have been given a visa for refugees fleeing a conflict

• Asylum seekers, under certain circumstances

What is a Mortgage?

Now the terms related to property purchasing vary from country to country. 

• Mortgage loan & down payment

A mortgage loan or mortgage is the same thing. Basically, it is the money you have to take to cover the portion of the house purchase that you cannot pay in cash. You have to pay the down payment in cash. 

The minimum down payment for a house in Canada is $500,000 or less is 5% of the purchase price & 10% for the portion surpassing $500,000 (if the mortgage is insured).

The minimum down payment for non-permanent residents authorized to work is 10%, & 5% for temporary residents. For uninsured loans, the down payment must be 20% of the purchase price.

• Amortization & term

The number of years you need to pay off the mortgage is Amortization. When this period ends, the property will be paid off in full amount. It generally lasts for 25 years for an insured loan & 30 for a conventional loan max.

The term Amortization is sectioned into various parts of either 3 or 5 years. 

The term refers to the length of your mortgage contract that sets the conditions of the loan, including your interest rate & the amount of your mortgage payments for a specific period. When your term ends, you will need to renew or transfer your contract.

• Interest rate

When it comes to choosing a mortgage, you have the option of selecting either a fixed or variable interest rate. A fixed rate means that the interest rate will remain constant throughout the term of the mortgage, but it is usually higher than the variable rate. 

On the other hand, a variable rate is typically lower but is subject to fluctuations based on certain economic indicators. It is worth noting that Canadian mortgage rates vary from one bank to another & are influenced by the Bank of Canada's key interest rate.

Get pre-approved for a mortgage

Now that you have a rough idea of how much you’re willing to spend on your down payment + monthly housing expenses, get pre-approved for a mortgage.

How to get it? Simply provide information regarding your income, assets, debts, & current employment status.

After submission, a lender will evaluate your application & either approve/refuse your request in 1 to 3 business days. 

If approved: Start looking for a home within your pre-approval value limits.

If refused: Speak to a loan officer to find out why or you could apply elsewhere.

Keep in mind that after 60 to 120 days, the pre-approval agreements expire. 

How to make an offer on the house?

If your application is approved & you find a home of your dreams within the price limit, make an offer on the property. If working with a realtor, get their help with the paperwork involved. 

Making an offer will include:

• Making a deposit – the amount you put down at the time of offer to show a seller you are interested in buying the property. This amount will get rolled into your down payment when you close on the house, but you can lose your money if you walk away from the sale before closing.

• Making a down payment – the amount you pay for your home in cash. 

There is technically no set deposit price in Canada, but it’s usually 5 to 10% of the home value.

Last Steps 

Get a house inspection – a norm in Canada as they help the buyer (you) from any potentially serious problems in a building. 

A fee has to be paid to see a house – but if you’re going to live in it, it is worth it.

And lastly, you finalize the house. But before you actually do that, finalize your financing options & sign a lot—and I mean a lot—of paperwork.

If you have received a pre-approval for a loan, you will continue to work with your lender to obtain formal approval for your mortgage. This process usually takes a few weeks at most. After the approval, your realtor will assist you in signing any required paperwork & completing the purchase of your new home.

Congratulations! Purchasing your first home in Canada as a newcomer can be nerve-wracking no doubt. Going through all the hassle will be worth it when you start living in it. Seek professional help from the best immigration consultants in Bangalore, Nationwide Visas, to understand the in-depth laws of buying a home in Canada as a new immigrant.