Vishwa Mohan and his wife Claire Xu have travelled the world throughout their careers in the hotel industry. But when it finally came time to settle in Toronto and purchase their first home, they found their permanent residency status worked against them, despite the fact they had solid work histories and money in the bank.
"I had a job before I even landed in Canada in 2010," says Mohan, a professional chef. "But when we started looking into the real estate market at the beginning of 2011, we were turned down because we were newcomers and didn't have enough background and credit history. They suggested we wait another six months, but we didn't want to do that."
There were also additional hurdles to getting approvals, including a sizable minimum down payment.
"That was the next problem," Mohan says. "They wanted a minimum of 20 per cent down, which would have been all of our savings from the last 10 years. Otherwise we would have had to pay $5,000 for mortgage insurance."
Militsa Fiuza, a mortgage agent with Invis in Toronto, says the problems the Mohans faced are typical with new immigrants.
"The biggest challenge they face is establishing credit. They have no history here. Another is the large down-payment requirements."
She says that it's getting easier, slowly but surely. "Banks used to demand up to a 35 per cent down payment. Because immigration is playing a huge role in the housing markets, the banks are starting to tailor mortgage programs to them. But there is still more required of new Canadians than someone who was born and lives here."
New Canadians are an increasingly important market for mortgage providers. The Department of Citizenship and Immigration reports that more than 280,000 immigrants came to Canada in 2010 - the highest number in 50 years. Between now and 2031, the foreign-born population of Canada is projected to increase approximately four times faster than the rest of the population.
Thomas Fischer, executive director for Habitat for Humanity in Brampton, notes that 80 per cent of families that approach them for financing are immigrants.
"One of the problems is they just don't have enough years of employment history in Canada to show a stable income. And they don't have the network they typically would have in their home country, so support is limited."
In many cases, they're in jobs that are below qualifications acquired in their home countries, he adds. "Another issue is language, especially when it comes to understanding how things work here."
Language and cultural barriers can prove extremely challenging in some mortgage application processes, Fiuza confirms.
"Brokers should sit down and explain how they need to go about the rules and regulations around getting a mortgage in Canada, including the difference between conventional and insured. A lot don't know any of this. Even if they come from the U.S., it's different."
There are a few things applicants can do to help their cause, Fiuza says. She encourages new immigrants who are first-time homebuyers to bring references from their banks back home, along with contact information (English language documentation preferred). Other important items to have in hand are a copy of your work permit, proof of landed immigrant status, passport, social insurance number, proof of employment, and a statement showing 90 days of account history in Canada.
One simple way to establish a credit rating relatively quickly is to get a secured credit card, says Parm Persaud, branch manager for Meridian Credit Union in Toronto.
"Use it regularly whatever you buy and more importantly, pay it off regularly."
He cautions people not to get too many credit cards.
"The more inquiries that need to be made, the lower your credit score and the more limited your borrowing capacity."
Another helpful hint is to show a pattern of savings.
"How you pay bills can be a key consideration," he says. "If you pay your landlord regularly, for example, and maintain a good payment history with your telephone or cable provider, that can be helpful. All of this, along with bank statements and referrals from your home country can help us make an informed decision."
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