Jay’s note: We are continuing to see a large influx of Canadian residents interested in buying real estate in the Phoenix area. Financing options for non-US citizens are a little different, so I asked Shailesh Ghimire, the Arizona Mortgage Guru, to provide us with a little lenders insight on mortgage financing options for Canadians buying US real estate.
There are many reasons to buy real estate in the United States. If you’re Canadian, parity of the two currencies (USD and CD) could be one of them. While I’m not going to make a recommendation on the wisdom of purchasing real estate in Arizona, I would like to inform you of the different mortgage financing options available to you as a foreign national.
The terms of the loan are bit more favorable if you are seeking to purchase a second (vacation) home in the United States. The definition of a vacation home is that you intend it use it for recreational purposes during a portion of the year and you do not derive any monetary benefits from ownership. Meaning you do not rent the place to a tenant. You will be asked to sign a disclosure statement to this effect.
If you are purchasing a vacation home then you will need a minimum of 30% down. So, for a $200,000 purchase the requirement down payment is $60,000. Additionally, you will be required to demonstrate that you have between 3-6 months of liquid reserves. This is calculated by multiplying your monthly payment by 3-6. Not all lenders require this reserve but many do, so if you have it the better it is for you.
As part of the approval process you will be asked to show 2-3 months of bank statements demonstrating that the funds for down payment and reserves are available. The lender is very suspicious when there are large depositions in your account (beyond your regular income) so be prepared to explain any such depositions. Finally, the assets need to be in a Canadian bank and the mortgage lender will request verification directly from your bank.
You will need to show a copy of your Canadian passport and/or driver’s license. Some lenders may request only one of these two but be prepared to furnish both if requested.
If you intend to purchase an investment property in the United States then the terms are somewhat more stringent. You will be required to put more than 30% down (determined on a case by case basis) as well as demonstrated more reserves (possibly up to twelve months). All other aspects of the loan are the same.
If you feel like these are conditions which you can fulfill then the first step is to complete a mortgage application with a reputable lender. In this step you will be asked information about such things as your employment and income, available liquid assets etc. In subsequent steps you will be required to furnish a letter of employment, relevant bank statements and a copy of the passport (or driver’s license). Once all the information has been verified the lender can then make a credit decision.
Be aware that with CTX Mortgage you do not need a particular property in mind to go through this process. We can do what is called a “credit approval” for you up to a certain price range. Then as long as the property you end up purchasing is within that price range all we need is an approval on the property/appraisal. After that we are able to close the transaction.
Finally, as you are aware, US credit markets are in a state of flux. This means loan programs have been changing more often than in the past. While these loan features are currently available, there is no assurance that these terms and conditions will remain in the future. I recommend you use this article as a reference point in evaluating loan options with the lender you end up working with.
[tags]mortgage info for Canadians, US real estate, Canada[/tags]