Brokers can act as an invaluable resource for newcomers looking to buy their first home in Canada
In February, the federal government revealed its plan to welcome more than 1.3 million permanent residents to Canada over the next three years. This ambitious goal underscores the important role that newcomers are expected to play in the country’s post-COVID economic recovery.
However, newcomers looking to enter the housing market often encounter unique challenges when applying for a mortgage from a traditional lender. This gives mortgage brokers an opportunity to act as a resource to help them understand their options when buying a home.
Understanding the newcomer segment
Statistics Canada defines a newcomer as a permanent resident (also known as a landed immigrant) who has been in Canada for five years or less. Last year saw more than 405,000 new permanent residents settle in this country, with most coming from India, China, and the Philippines.
Federal immigration minister Sean Fraser said newcomers “play a crucial role in the future of our country,” and earlier this year announced a goal of welcoming 431,645 permanent residents in 2022, 447,055 in 2023, and 451,000 in 2024.
Unique challenges newcomers face
Christine Xu, president and principal broker at MoneyBroker Canada, says a thin financial history in Canada can be a significant hurdle for newcomers to overcome when applying for a mortgage. “New immigrants often have to build up their credit history from zero,” she says. “With no Canadian working experience, most are not able to find employment with high enough pay to be able to qualify for a mortgage. And though many newcomers come to our country with some savings, with a thin credit history and low employment income – or even no employment income if they are self-employed – it’s very difficult to get a mortgage approved from a traditional institutional lender.”
Role of a broker
These challenges make it important for brokers to educate newcomers on their options. For instance, Xu says brokers should advise newcomers to “establish their credit history as soon as possible by using credit cards or taking out car loans and leases.”
“And if the borrowers are self-employed, brokers should advise them to keep a good record of income by depositing all cash and cheques into their bank accounts regularly so they can show lenders their gross income to qualify them for mortgages.”
Another way brokers can help newcomers overcome their lack of financial history is by introducing them to alternative lenders such as Home Trust, who will take the time to understand their unique situation and evaluate their full financial picture, including factors such as their future earning potential and existing assets.
“Being mortgage brokers, we have to educate newcomer borrowers that there are alternative lenders out there who do not qualify borrowers with only reported salary income,” says Xu. It is equally important that brokers help lenders understand how newcomers will be able to make their mortgage payments.
“Newcomers usually have savings with them here in Canada, or on the way to Canada from their home countries because they need to sell properties back home and transfer sale proceeds to Canada,” says Xu.
“And lots of newcomers are entrepreneurs who own their own businesses, so they don’t have standard employment income.”
In the end, the key to providing quality service to newcomers is helping them understand their lending options and partnering with lenders like Home Trust, who work to ensure that their entire story is heard.
Are you ready to partner with Home Trust? Visit hometrust.ca/partners to learn more.
