Can new immigrants buy a house in Canada?

New to Canada and wondering if you’re eligible to buy a house? First and foremost—congrats! Let us be the first to welcome you to your new home country.

Now that you’re here, though, you might be wondering if owning your first Canadian home is even a possibility.

The answer? Absolutely. Newcomers to Canada are allowed to buy a home, even if they’ve just immigrated to the country. Plus, new immigrants to Canada can often qualify for a mortgage, so long as they meet a number of standard financial requirements.

As a newcomer to Canada trying to navigate a new world of homeownership rules and regulations at the same time, things can get overwhelming, to say the least. So to help you out, we’ve put together a detailed guide to everything you need to know about buying and owning your first home as a new immigrant to Canada.

Can a new immigrant to Canada buy a house?

As we’ve already mentioned, there are no laws or regulations that prevent newcomers to Canada from purchasing a home. Anyone in Canada who can afford the costs of homeownership is eligible to own a home, be that a condo, a duplex, or a single-family house.

In fact, Canada has no residence or citizenship requirement on property ownership. That means that anyone can purchase property in Canada, whether they’re a citizen, permanent resident, temporary visa holder, or just someone interested in owning Canadian real estate.

Ultimately, so long as you abide by Canadian taxation and real estate laws, homeownership in Canada is technically possible for anyone.

Are new immigrants to Canada eligible for a mortgage?

Now, maybe you’re thinking: It’s great that I’m allowed to own a home as a newcomer to Canada, but will a bank actually offer me a mortgage? Or will I have to pay for my home in cash?

Well, we have more good news for you: Immigrants are eligible for a mortgage, so long as they can meet a number of financial requirements.

Many Canadian banks and lenders are more than happy to work with newcomers to the country, even if they don’t have an established Canadian credit history. Canada is actually one of the few countries where non-residents can qualify for a mortgage—often at the same interest rates as local citizens and residents!

As you can imagine, getting a mortgage as a newcomer does require jumping through a few more hoops than someone who’s been living in the country for years. But even some of the largest banks have dedicated newcomer mortgage programs to help you finance your first home.

While eligibility requirements for these special mortgage programs vary from bank to bank, you typically need to meet the following requirements to be considered:

• Permanent residence status – To qualify for a dedicated newcomer to Canada mortgage program, most banks require that you have confirmed status as a permanent resident. There are other mortgages available to non-residents, but these have different requirements.

• Proof of income – Most banks want to know that you have a steady stream of income that you can use to pay off your mortgage. Your current income level will likely have an impact on the size of the loan you qualify for and the interest rate you'll be offered.

• Employment history – Some mortgage programs for newcomers have a two-year Canadian employment history requirement. This helps assure the bank that you’re able to hold a steady job in the country. But some banks will waive this requirement if you put up a larger down payment.

• Down payment – In Canada, the minimum down payment on a home is 5%. However, many mortgages for newcomers require a 20% down payment. Sometimes they even require a 35% down payment if you don't have two years of in-country work history.

• Credit check – If you immigrated to Canada within the last two years, you may not have much of a credit score in the country. Many mortgage lenders understand this and will vet your application based on other factors. But establishing a credit history early, such as through KOHO’s Credit Building tool, can certainly help.

• Bank reference letter – Newcomers without two years of employment history in Canada may need to obtain a reference letter from their bank in their last country of residence. This helps banks vet your total income and credit history, even when you don’t yet have much of a financial history in Canada.

We know that this sounds like a lot of information to collect before you start shopping for your first home. But keep in mind that banks that offer mortgage programs for newcomers understand the challenges that you might face. Consequently, they often have dedicated mortgage specialists that will work with you to determine what’s best for your needs.

"Newcomers to Canada are allowed to buy a home, even if they’ve just immigrated to the country."

How to buy your first home in Canada

At this point, you know that you’re eligible to both own a home and get financing for that home as a newcomer.

However, thinking about owning a home and going through the home buying process are two totally different things. To make matters even more complicated, the home buying process in Canada is likely quite unique.

Although every prospective homeowner goes through a slightly different process when purchasing a home over here, here’s a brief overview of what you can expect as you navigate the process yourself.

Step 1: Understand what you can afford

There are no ifs, ands, or buts about it: Housing prices in Canada are expensive.

The average house price in Canada as of mid-2021 is a whopping $716,000, a figure that’s only expected to rise in the coming years. Of course, this average house price is largely driven by the often astronomical cost of housing in places like Vancouver and Toronto, but home prices are on the rise throughout the country.

With this in mind, it’s critical that you understand what you can actually afford when it comes to your down payment and your monthly housing payment.

Remember that you’ll need to pay not only your mortgage, but also your homeowner’s insurance, utilities, property taxes, and potentially even additional mortgage insurance, every single month. Creating a solid budget using KOHO’s ultimate budget template can help you understand how much house you can afford.

Step 2: Get pre-approved for a mortgage

Once you have a general idea of how much you’re willing to spend on your down payment and monthly housing costs, it’s time to get pre-approved for a mortgage. This pre-approval process might be different from what you may have experienced in your last country of residence, so it’s important to understand what’s required at this stage.

In Canada, most banks and mortgage lenders offer pre-approval, which is a process where you learn the maximum loan amount for which you can qualify. This process also helps you estimate your potential mortgage payments. Sometimes, lenders will even let you lock in a current interest rate for up to 60 to 130 days.

To get pre-approved for a mortgage, you normally have to provide information about your income, assets, debts, and current employment information.

After you submit this information, a lender will assess your application and either approve or refuse your request within about 1 to 3 business days. If approved, you can start shopping for a home that falls within your pre-approval value limits. If your application was refused, you can speak to a loan officer to find out why or you could submit an application elsewhere.

Do note that many pre-approval agreements expire after anywhere from 60 to 120 days. So this is only a step you should take if you’re serious about buying a home in the near future.

Step 3: Search for the perfect home

Now that you have your pre-approval in place, you can start searching for your new dream home.

Your pre-approval will give you an idea of how much you can spend, but this doesn’t mean that you need to spend this much. For example, being approved for up to $500,000 doesn’t mean that you have to search for homes in that price range. You can always look for a more affordable home.

During this stage, you’ll likely want to enlist the help of an experienced real estate agent. There is no legal requirement to hire a real estate agent in Canada, but as a newcomer, doing so is highly recommended. Ask your neighbors and friends if they know of a trustworthy realtor that can help you through the home buying process.

Step 4: Make an offer

As soon as you find a home within your price range that you want to buy, you can make an offer on the property. If you’re working with a realtor, they can help you navigate all of the paperwork involved with this process.

Making an offer on a house in Canada often requires putting down a deposit. However, this deposit and your down payment are not the same thing. A down payment is the amount that you pay for your home in cash as part of the mortgage lending process.

Meanwhile, homebuyers will usually put down a deposit at the time of offer to show a seller that they’re serious about a 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. There is technically no set deposit price in Canada, but it’s usually 5 to 10% of the home value.

Step 5: Get a home inspection

As part of your offer on a new house, you should always make your offer contingent on a successful home inspection. Home inspections are the norm in Canada because they help protect the buyer from any potentially serious and dangerous problems in a building.

You will need to pay a fee for a home inspection, but it’s worth every penny. Many realtors and mortgage lenders will help you find a qualified home inspector as part of the homebuying process.

Step 6: Finalize your financing

Before you can actually close on your home, you’ll need to finalize your financing options and sign a lot—and we mean a lot—of paperwork.

If you were pre-approved for a loan, you’ll continue working with your lender to get your mortgage formally approved. This normally happens within a few weeks at most. Afterward, your realtor will help you sign any necessary paperwork and finalize your home purchase.

Step 7: Enjoy your new home!

Congrats! At this point, you’re a newly minted homeowner. Although purchasing your first home as a newcomer to the country can seem daunting, it’ll all be worth it when you move into your new residence for the first time.

Living the Canadian dream in your new home

Figuring out life as a newcomer to any country isn’t easy, especially when it comes to handling your finances.

As a new immigrant to Canada, however, you can rest assured that you are eligible to own a home. Plus, you can even get financing for your home to make your Canadian dream a reality. What could be better?