It\u2019s no secret that first-time buyers have it tough in the current Canadian housing market. The homebuying process is fraught with confusing guidelines, financial prodding, and, occasionally, rejection. For Canada\u2019s immigrants, these challenges are only amplified.<\/p>\n
According to Statistics Canada, an average of 235,000 landed immigrants arrive in Canada every year. Many of these immigrants will face the same hurdles when entering the housing market. A lack of Canadian credit history and unrecognized educational credentials make it difficult to secure a generous mortgage; adding in potential language barriers, limited financial reserves and adapting to a new culture, first-time new immigrant homebuyers have a lot on their plate. It was these barriers that frustrated Brazilian-born, Vancouver-based mortgage specialist Andreia Guariento to the point of certifying as a mortgage agent in order to buy her first Canadian home.<\/p>\n
\u201cThe bank was just shutting down in our faces. We didn\u2019t have credit built at the time. We got any survival job we could, so we were not working in our fields,\u201d she says. \u201cI got really frustrated. I went into the library and I got every single dummy book on mortgages and credit and how to get a mortgage in Canada, and that\u2019s how my story started.\u201d<\/p>\n
Establishing roots in a new community and a finding place to call home is important for new immigrants. Beginning a new life with better housing and access to safer, amenity-rich communities is at the top of the priority list for many newcomer buyers, though the dream can be costly.<\/p>\n
\u201cMarkham is known to have the best schools around, in the province,\u201d says Asif Khan, the owner of Re\/Max Prime Properties, a brokerage based in Markham, which is a popular city for immigrant families in the Greater Toronto Area. \u201cThat attracts a lot of people. They\u2019re not scared to spend more than what people are asking just so that they can allow their children to go to school at the best schools.\u201d<\/p>\n
If you\u2019re a new immigrant to Canada, or are thinking of moving here, there is a lot to know when it comes to purchasing a home. Here, Khan and Guariento share what first-time new-immigrant buyers need to know about purchasing their first piece of Canadian real estate.<\/p>\n
There\u2019s proof in the pennies<\/strong><\/p>\n Along with your furniture and family, moving countries will require you to transfer your finances. While the process of moving money from one bank account to another sounds simple, there are several income and bank-related regulations that are sometimes overlooked. The most common of these is how much money a new immigrant can carry over to cover down payments and other housing expenses.<\/p>\n A new immigrant can transfer over $10,000 in Canadian funds, but any amount exceeding this sum needs to be reported to the Canada Revenue Agency. It\u2019s common for new immigrants to believe that this money will be taxed, but Guariento explains that taxes will only apply to the money from the country of origin.<\/p>\n \u201cYou don\u2019t have to pay the taxes [on the money] here. You pay the taxes on the source of the money,\u201d she says. \u201cThe only thing that you will pay is the fee that the bank will charge you and the currency exchange.\u201d<\/p>\n Immigrant homebuyers may encounter limits on the amount of money they can withdraw in one year from their bank as well as laws in their country of origin. China, for instance, implemented restrictions in 2018 that capped overseas withdrawals from Chinese bank accounts to 100,000 yuan, the equivalent of $20,000 Canadian dollars, per year, per person. Khan explains that has been a recurring problem in the Asian-concetrated communities within Markham, as new buyers are limited on what they can carry over for downpayments.<\/p>\n \u201cPeople can\u2019t bring out as much money as they used to be able to, and that\u2019s creating a problem here where their relatives or their friends were able to purchase $700,000 to $800,000 homes just by putting down 30 percent because they were able to bring it over,\u201d says Khan.<\/p>\n As a precaution to prevent money laundering, Guariento says Canadian banks will require funds to have 90 days worth of history sitting in an account, otherwise they will need proof of its source. New immigrants liquidating assets to buy a home in cash, Guariento explains, shouldn\u2019t keep the money at home, or it will raise red flags.<\/p>\n \u201cIf you just walk into a bank with $3,000 and try to deposit it into your account, the bank now has to ask you where the money is coming from,\u201d she says. \u201cThat\u2019s how drug dealers do it. They don\u2019t put $10,000 in as a weekly deposit. It\u2019s $200 here, $400 there. This is why we as a broker need to be looking at bank statements.\u201d<\/p>\n Ignore those money myths<\/strong><\/p>\n A healthy credit history guarantees a decent interest rate and a good pre-approval from a mortgage lender \u2014 if you have a credit history to begin with.<\/p>\n When you immigrate to Canada, your credit score and history does not follow you from another country. This means starting over from scratch. It takes a couple years to build an extensive enough credit history for lenders to recognize. Securing a mortgage with an A-lender or major bank that requires a comprehensive Canadian credit history might not be possible in the first few years. To build credit, Guariento recommends applying for credit cards with a minimum limit of $1,000 as soon as possible.<\/p>\n \u201cRight away, when they get here, they need to have at least two credit cards,\u201d she says. \u201cApply to credit cards, and if you\u2019re not getting any credit cards, go to any bank and get a secured credit card that requires a deposit against them.\u201d<\/p>\n One money myth Guariento frequently hears first-time buyers being told is the need to get a car loan to build credit. Instead of building credit slowly by using cards, Guariento sees new immigrants become locked into expensive car payment plans, assuming that a large debt will build credit more quickly. Guariento explains a credit card or a car will build your credit the same way, but car financing reduces the amount of mortgage you can qualify for.<\/p>\n \u201cYou could quailfy [for a mortgage] at $400,000, but because you have $30,000 [worth of] car financing, they will reduce $150,000 of your affordability,\u201d she explains. \u201cInstead of buying something for $400,000, now you will only qualify for $250,000.\u201d<\/p>\n As some immigrant families rely on savings to supplement income while getting established, Guariento says car loans are a large drain on potential downpayment funds. Instead, she recommends transferring the car lease to someone else or avoiding car loans altogether in order to improve your chances of buying a home.<\/p>\n Home sweet home<\/strong><\/p>\n Arriving in a new country with little intimate knowledge of the housing market can make it a challenge to find the right home, but working with an honest realtor is a good start.<\/p>\n Khan finds that a lot of his Chinese and Hong Kong clients wish for amenities that are accessible on foot, just like the neighbourhoods they lived in back home. Khan says it takes a good realtor who listens to their client\u2019s needs to find the right property that will feel like home.<\/p>\n \u201cI think it means listening to them, knowing what they\u2019re used to back home, and being able to find a spot that is very similar to being back home,\u201d he says.<\/p>\n Finding a trustworthy realtor provides more than just the comforts of home \u2014 it ensures that your new property will not be a disappointment. If you\u2019re buying sight unseen, before you\u2019ve physically moved to Canada, Khan says that you must trust that your realtor is being up-front about what you\u2019re purchasing. He\u2019s heard a lot of horror stories of new immigrants walking into their first Canadian home only to be disappointed.<\/p>\n \u201cI think it\u2019s more important for them to know who they\u2019re dealing with, make sure that they\u2019re reputable, and being able to trust the representative and know what they\u2019re purchasing,\u201d says Khan. \u201cEspecially if they\u2019re spending a million dollars, is [it] something that they\u2019re going to be happy with?\u201d<\/p>\n What came first, the house or the job?<\/strong><\/p>\n A crucial component of getting qualified for a mortgage is having a consistent source of income to make payments. But finding your footing in the Canadian labour market can take time \u2014 it may be a few years before that well-paying job comes along.<\/p>\n Employment status plays a meaningful role in the mortgage pre-approval process. If you\u2019re working part-time or contract, and your income is enough to support a mortgage, a lender will require at least two years\u2019 worth of employment history to qualify you. If you work full time, the length of employment history needed could shrink to as low as 90 days. Guariento explains that consistent, well-paid employment will always trump your job role in the eyes of the lender. When crafting a mortgage application, Guariento usually attaches the client\u2019s resume to attest to the applicant\u2019s potential.<\/p>\n \u201cI just make the profile a little richer, so when the underwriter gets the application, they know a little bit about the client. They only see paperwork,\u201d she says.<\/p>\n If you\u2019re waiting for the right job to come along so you can afford a bigger house, Guariento says not to sit around. With some professional credentials unrecognized in Canada, many lawyers and doctors may be waiting to recertify or find a high-earning position, but in Geuariento\u2019s opinion, this will only allow rent to burn into your funds for a downpayment.<\/p>\n \u201cIt\u2019s painful to see the money going down, going down, going down every month [because of rent] just because I\u2019m looking for the perfect job,\u201d she says. \u201cIt will come, but it\u2019s going to take time.\u201d<\/p>\n