Housing: Getting a Mortgage
By David Nickle
Owning a home is a dream for many Canadians, and it is one for many new Canadians too. But buying a home is not easy.
A study from Statistics Canada (a government agency that collects information about Canadians and how they live) earlier this year showed that the ability of newcomers to buy homes went down between 1981 and 2001. The study, by Michael Haan, could not say why this was so. But the job of applying for and receiving a mortgage is a barrier that many who are new to this country face.
According to Anthonet Grazia, Director of Lending at ING Direct Canada, it can be more difficult for newcomers to obtain a mortgage because it is harder to get good information about that person.
That is in part because for many newcomers, credit history – how well a person has been able to repay debts – is housed very far away in their home countries.
Grazia said that most lenders are more interested in the credit history here in Canada.
“We have from time to time utilized credit bureaus from other countries, but the decision still comes from how solid the individual is in other aspects of employment – how long they've been in the country, their net worth, whatever other assets the individual might have.”
Grazia says that establishing a good credit history in Canada normally takes one year or more. But all applications are treated individually. She says that anyone applying for a mortgage should tell their loan officer about anything that might help.
“Particularly for folks new to Canada, it would be important for them to ensure that they're painting the entire picture, as opposed to not disclosing information that would help them establish credit.”
Grazia uses as an example a newcomer who has come to Canada with a good job that included a signing bonus – thousands of dollars given by the employer before work even starts.
“Disclosing that information will help you,” she says. “Whereas some people will provide bare minimum amounts of information, and it's not enough for the approval.”
Grazia says it is also important when building a good credit rating to not only make bill payments on time, but also to avoid applying for too many credit cards.
That is because each time someone does this, the credit card company will make an inquiry with the Credit Bureau of Canada. That is the agency that keeps records about how well a person repays their debts.
If there are too many inquiries on file, says Grazia, that person could be considered a “credit seeker.” That is somebody who tries to borrow too much money and perhaps does not intend to repay it.
“So don't be applying for every department store card you can get your hands on,” she says.
“But my biggest piece of advice is to be realistic and to be patient,” she says. “You might want to get that house in two months and want to get it approved right through the gate, and that might not be realistic based on your personal situation.”
Joey Sit, Vice-President (Ontario) for HSBC Canada, says that a good credit history both here and in the home country is a big asset. He says that if a newcomer is a long-time HSBC customer, both of those can apply more equally.
“For new immigrants, they may not have the kind of credit history established in Canada – this is where if they're an existing customer in their home country it helps big time,” he says.
But Sit says that ultimately, the bank is looking at the customer's ability to pay.
“The loan amount can determine what flexibility the bank has,” he says. “They also need to know that the money for the down payment is in place. And if new immigrants are in a situation where they need extra support, they can bring a guarantor for the loan. If you are a younger immigrant and your parents are here, it's not unusual that the parents will be the guarantor.