If you’ve just moved to Canada from another country, you’re already in the midst of an exciting transition in your life. As part of this transition, you may be looking to purchase a new home (and maybe even your first home!). Although you may already be somewhat familiar with the purchasing process, here are a few tips and knowledgeable tidbits to help make your process of buying a new home in Canada seamless and stress-free.
In Canada, if your down payment is lower than 20% of the purchase price of the home, you’ll require mortgage insurance. CHMC or the Canada Housing and Mortgage Corporation provides this type of insurance to Canadians. It’s important to note, however, that, unlike life insurance, this type of insurance is intended to protect the lender. Therefore, if you find you lose your job or there is an accident, your mortgage insurance will not protect you and your family, it protects the lender from you being a financial risk to them.
Credit Score & History
When trying to get approved for a mortgage, a good credit score and history is an important factor. As a newcomer to Canada, you may not have had the opportunity to establish a good credit rating yet. There are a few strategies that you can use to quickly establish your credit score like getting an unsecured or secured credit card, for example, and paying off your balance in full every month.
Before you begin to look for your new Canadian home, it’s a good idea to secure a pre-approval. A pre-approval is basically an estimate of how much of a mortgage loan you’ll be approved for. By getting pre-approved, you’ll have a good understanding of how much house you can afford and which types of properties fit into your budget and price range.
The Mortgage Stress Test
In January of 2018, the government of Canada introduced new mortgage regulations. As part of these regulations, Canadians will now need to pass a mortgage ‘stress test’ in order to be approved for a mortgage by a major lender. Essentially, the stress test requires potential borrowers to prove that they could financially handle their mortgage payment if it were two percentage points higher than the current rate. For more information about the mortgage stress test (and whether you really need to stress), check out my previous blog here.
Work with A Mortgage Broker
For new Canadians, working with a mortgage broker is a great idea. Mortgage brokers work with various lenders to find their clients the best mortgage solution possible. In many cases, if an initial mortgage application is denied, your mortgage broker will be able to find approval with an alternative lender. Mortgage brokers are also paid a commission fee by the mortgage lender, which means working with a mortgage lender will not cost you, the borrower, any money.
Do you have questions about the process of buying a home and applying for a mortgage in Canada? As an experienced mortgage broker in Barrie, Ontario, I’d love to help! Connect with me today at (705) 315-0516 and let’s discuss your needs. Together. we’ll work to find the right mortgage solution for you.