In our last blog, we look at three different homebuyer journeys of people that were either new to Canada or considered non-resident. We also highlighted some of the challenges involved in those cases. For this month’s solutions roadmap, we’re breaking down the unique parts of the mortgage qualification process for non-residents, temporary, and permanent residents!
- Non-resident
This first category is for someone who may or may not be earning money or paying tax in Canada. These individuals can still buy and may find that there are more options available to them through alternative and private lenders.
- Could be someone who is or isn’t Canadian
- Could be someone new to Canada but not employed
- Need a minimum 35% down payment (or even closer to 50% through regular banking channels)
- Requires proof and history to back up the down payment
- Requires 12 months of the mortgage principal, interest, and property tax in a Canadian bank account
- Foreign applicants require an international credit report and/or established credit history
Challenges: The biggest challenge is the larger down payment. If you don’t live in Canada and don’t pay tax, the government can’t come after you and so you’re required to put up much more upfront. Another hurdle can be the vetting of funds as it can be tougher to prove you have the money you say you do when you live in a different country. There are more paperwork hoops to jump through to prove income. Not only that, some countries will only allow you to move so much money out of the country at one time.
Solutions: Non-residents must have significant cash down payment that they can move out of their country — so plan ahead! Since you’ll need to have your cash in Canada for at least 30-90 days to prove it’s legitimate, it’s better to be organized and early. Ensure you have good documentation on your finances in your country which includes bank account history, credit history, liability payments, wire transfers, etc. You’ll also want to ensure that everything can be translated into English (or French) and into the North American banking system.
- Temporary resident
For this category, we’re talking about someone who is on a temporary Visa (for work or school). This category can also refer to someone who has immigrated to Canada but is still in the process of getting citizenship.
- Requires a minimum 10% down payment
- Requires a proper credit report or combination of six months of credit card and bank statements proving on-time payments (can come from the country of origin)
- Must have relocated to Canada within the last 24 months
Challenge: Temporary residents can only exist as such for a certain period of time. That said, deals must be made in that time. Although temporary residents have been vetted to some degree, length of employment and non-established credit are all factors. Not all countries track credit the same way as the North American system. Some countries have credit systems similar to Canada, while others have completely different systems (if any). Temporary residents may not have to have a 35% down payment but it must come from their own funds.
Solutions: Once again, plan ahead, since you’ll need to have your cash here for at least 30-90 days in order to prove it’s legitimate. Ensure you have good documentation on your finances in your country of origin (i.e. bank account history, credit history, liability payments, wire transfers, etc.) and ensure that they can be translated accordingly. You’ll need three months minimum of employment history unless you’re being transferred from a company that is operating outside (and inside) of Canada.
Since an international credit bureau will take longer and cost more, depending on where you’re from, we can look at other sources of creditworthiness. Be it 12 months of rent history, 12 months of utility bill payments, or a letter from a recognized financial institution (with accompanying bank statements), there are options. If you don’t already have credit though, you’ll need to build it from the ground up. All these different scenarios can affect your down payment requirement.
- Permanent resident
In this type of case, we’re looking at someone who has been granted permanent residency.
- Could be someone who immigrated within the last 60 months
- Requires a minimum of three months full-time employment
- Requires 12 months history of rent payments (if less than two years)
- Requires 12 months history of utility bill payment (if less than two years)
- The down payment must come from your own resources if it’s only 5% down (but can also have a gift portion if it’s more than 5% down)
Challenge: The challenges for permanent residents (who have moved to Canada) are similar to those of any other Canadian resident. Down payments, credit, employment, debt, etc. are all some factors we’ve discussed in our other blogs.
Solutions: Same as anyone, we find them a deal!
Pro Tip: If you are a temporary or permanent resident, don’t agree to an “all-inclusive” lease. Please ensure your name is on your utility bills (ie. electricity, gas, water, etc.) allowing you to build credit in your name (cell phones don’t count).
Contact the Kyle Miller Mortgage Agent team if you’re newer to Canada and looking to buy a home. We take the time to understand your situation and provide you with different mortgage options and solutions!
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