Immigrating to Quebec

What is a credit score and a credit rating? What is the difference and do I need it?

The credit score and credit rating are the same thing. It is the score assigned to your credit report, ranging from 300 to 900. The higher the score, the better your credit rating, and consequently your credit report. The credit report is a history of your credit usage, including:

• The length of your loans (how long the credit has been active)
• The limits obtained and balances on your limits
• Your payment habits since obtaining credit (do you pay on time and as agreed, or are you late?)
• The quality of credit (credit obtained from a financial institution issuing a mortgage loan or from a store such as Walmart or Canadian Tire?)

Before issuing a mortgage offer for newcomers, banks base their decision on:

1. Your down payment
2. Your length of employment and income
3. Your credit report and score

The best conditions (interest rate, amortization, product offered) for financing are generally obtained with credit scores of 681 or higher.

Why do I need to use credit if I pay my account on time and in full?

Although limiting our use of credit is a responsible habit to adopt, it doesn’t necessarily make it easier to obtain a mortgage. Banks ask themselves certain questions, such as:

If you have no credit, have you ever gone bankrupt and no one wants to lend to you?

How can we trust your ability to manage other people’s money if you have no credit history to show us?

If you pay everything in cash, are you involved in money laundering or tax evasion activities?

Even though these ideas are not always founded, it is important to consider them when applying for a mortgage as a newcomer. It is better to use credit responsibly than not to use it at all.

Can I make an offer to purchase upon arrival, or do I need to obtain a loan first?

Here in Quebec and elsewhere in North America, it is best to obtain a mortgage pre-approval before visiting properties. A mortgage broker can help you qualify and obtain your mortgage pre-approval. With this document, the bank commits to granting you a mortgage financing according to the amount indicated, with an interest rate that will be frozen for 90-120 days. It is conditional on your financial situation not changing during this time.

With the mortgage pre-approval for newcomers, real estate brokers will be more open to showing you houses because they know you are serious buyers. Nowadays, it is rare to visit houses without a mortgage pre-approval.

The difference between a mortgage pre-qualification and a mortgage pre-approval is that the pre-qualification is just an estimate of the possible amount based on your income. No credit check is done, this is just to have a possible idea of the potential amount. Then you need to obtain the pre-qualification for house visits.

Do I have to use the same lender as in my pre-qualification?

No. It is not mandatory to limit yourself to a single mortgage lender. The mortgage broker’s job is to constantly research the different products offered by different mortgage lenders. If the mortgage broker finds a product better suited to your situation during your house search, they will send your financing application to the other lender with the best product.

Do I need to get pre-qualified for each house I visit?

No, the goal is not to pre-qualify you for the minimum amount, but rather for the maximum amount so that you can focus on buying houses that are in this price range or below.

However, if you change your mind and wish to buy a more expensive property, such as a duplex or triplex for rent, you will need to re-qualify for a mortgage, even if you already have a mortgage pre-approval. The mortgage broker knows the internal criteria of the banks and can tell you if you are eligible for a higher amount, considering the income of the desired property.

In Quebec, is it more advantageous to rent or buy with a mortgage?

It depends on each individual’s situation. It is certainly preferable to aim for property acquisition. This is an excellent way to invest in real estate and start building your wealth in Canada. Additionally, you start building equity that can be transferred to your children.

Renting is always an option, but considering that rents have become almost equivalent to a mortgage payment, sometimes it’s worth the cost of buying right away!