A first-time buyer’s guide to purchasing a home as a new immigrant to Canada

It’s 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’s immigrants, these challenges are only amplified.

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.

There’s proof in the pennies

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.

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’s 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.

“You don’t have to pay the taxes [on the money] here. You pay the taxes on the source of the money,” she says. “The only thing that you will pay is the fee that the bank will charge you and the currency exchange.”

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.

“People can’t bring out as much money as they used to be able to, and that’s 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,” says Khan.

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’t keep the money at home, or it will raise red flags.

“If 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,” she says. “That’s how drug dealers do it. They don’t put $10,000 in as a weekly deposit. It’s $200 here, $400 there. This is why we as a broker need to be looking at bank statements.”

Ignore those money myths

A healthy credit history guarantees a decent interest rate and a good pre-approval from a mortgage lender — if you have a credit history to begin with.

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.

“Right away, when they get here, they need to have at least two credit cards,” she says. “Apply to credit cards, and if you’re not getting any credit cards, go to any bank and get a secured credit card that requires a deposit against them.”

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.

“You 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,” she explains. “Instead of buying something for $400,000, now you will only qualify for $250,000.”

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.

Home sweet home

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.

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’s needs to find the right property that will feel like home.

“I think it means listening to them, knowing what they’re used to back home, and being able to find a spot that is very similar to being back home,” he says.

Finding a trustworthy realtor provides more than just the comforts of home — it ensures that your new property will not be a disappointment. If you’re buying sight unseen, before you’ve physically moved to Canada, Khan says that you must trust that your realtor is being up-front about what you’re purchasing. He’s heard a lot of horror stories of new immigrants walking into their first Canadian home only to be disappointed.

“I think it’s more important for them to know who they’re dealing with, make sure that they’re reputable, and being able to trust the representative and know what they’re purchasing,” says Khan. “Especially if they’re spending a million dollars, is [it] something that they’re going to be happy with?”

What came first, the house or the job?

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 — it may be a few years before that well-paying job comes along.

Employment status plays a meaningful role in the mortgage pre-approval process. If you’re working part-time or contract, and your income is enough to support a mortgage, a lender will require at least two years’ 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’s resume to attest to the applicant’s potential.

“I 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,” she says.

If you’re 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’s opinion, this will only allow rent to burn into your funds for a downpayment.

“It’s painful to see the money going down, going down, going down every month [because of rent] just because I’m looking for the perfect job,” she says. “It will come, but it’s going to take time.”