Financing Options for Canadians Buying US Property

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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]

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  1. Awesome! Thanks Jay & Shailesh. Iwill pass this along to my clients and readers. Standby for pingback.

  2. Tim Hall says:

    Our family income is $200000 and we wish to obtain a new mortgage on a house we own in Phoenix. We are Canadian Citizens and we live and work in Edmonton, Alberta, Canada. Are you able to provide a mortgage in this situation?

  3. Shailesh says:

    Tim,

    We can do either a refinance or purchase loan for Canadian citizens. I'm not sure if you already have a mortgage which you are seeking to replace with a new one or are you seeking to purchase?

    Thanks,

    Shailesh

  4. Terry Hoknes says:

    Are there any rules about Canadians coming buying US property but paying cash for it (no banks or mortgages) and then using the property as rental/profit property ??

  5. Arthur Boguslawski says:

    I am interested in the answer to Terry's question as well. More specifically though if I were to use funds from a HELOC to purchase US property. My understanding is that you would not be able to expense your interest against your US tax claim. Is that correct?

    Arthur

  6. Terry – You can still do a purchase if there is no bank involved. Make sure you're working with an experienced agent – and title company.

    Only banks ask you to declare the purpose of your purchase. Since you're purchasing with cash then you can do whatever you wish – rent it, use it as a vacation home etc.

    Arthur – I am not a tax expert and this question is beyond me. I suggest contacting a tax expert. Sorry.

  7. Canadian nationals need to be *careful* when renting out property they own in the US. If you "work" the property (repairs, even finding tenants) you apparently can run afoul of Canadian law. See this link for details (scroll about a third of the way down and look for the bold print):

    http://www.centa.com/CEN-TAPEDE/archive/Week-of-M

  8. Arthur Boguslawski says:

    Hi Jay – I was considering putting in an offer on a US property this week and I've been doing as much due diligence as possible. I actually came accross the blog you directed me to earlier this afternoon and it has totally turned me off from purchasing a property in the States. It sounds like more headache than it's worth. But I know there must be thousands of Canadians that own vacation property in the US, so I don't know what to think or do.

    I also don't know where to get tax advise without paying a consultant $500/ hour.

    Arthur

  9. Arthur – We work with Canadian buyers all the time, and all have greatly enjoyed their properties here. Some rent them out, some don't. From what I understand, there really are no issues with renting out a property — as long as you use a property manager (and I don't know why you wouldn't anyway).

    I certainly do not know Canadian tax law. I can't keep up with US tax law, much less an additional country! I don't know what CPAs (Certified Public Accountants) or their equivalent in Canada cost, but it's nowhere CLOSE to $500/hour here.

    There are a few "hoops" to jump through for a Canadian to buy property here in the States, but with the Loonie as strong as it is against the Dollar, we're seeing a awful lot of people that think it's worth it.

    What part of the US are you looking at?

  10. Just to add to Jay's point earlier. CPA's are not as expensive. In fact I know a very good CPA in Scottsdale, who also happens to be Canadian. I would be more than happy to connect you if you so desire.

  11. Arthur Boguslawski says:

    That would be great, thanks.

  12. Arthur,

    Can you send me your e-mail. I'd rather not post the number and information of my CPA on a public forum.

    Thanks,

    • Bob Popil says:

      I also am looking for property in arizona, could you please send me the e-mail add. of the CPA that you know.. any help would be awesome.. thanks.. Bob Popil

    • Shane Baker says:

      I know that this is an old post but i hope that this still finds you. I am a Canadian looking to invest in the phoenix area and am looking to put a team together to help me make this happen. I would much appreciate the contact info for your CPA to speak with. Thanks in advance for your help, Shane Baker

  13. Hi Jay – As you know, the Phoenix Valley is a popular place for many Canadians. I was just told about a great resource book for Canadians looking to purchase second homes in the U.S. It is called "The Canadian Snowbird in America: Professional Tax and Financial Insights into a Temporary U.S. Lifestyle" and it is by Terry Ritchie and Brian Wruk. It is currently on its way to me and I am looking forward to learning more about the nuances of these transactions. Thanks to you and Shailesh for an informative post.

    - Heather

  14. Dan says:

    Shailesh,

    I have many Canadians that are looking to purchase here in the valley also, but they are unable to find financing other than through Harris Bank and WaFed. Do you know of any other sources of lending than these?

    Dan

  15. Joe Pereira says:

    My brother is a US Citizen I am Canadian… we are looking at buying 2 homes in the Phoenix area he has to put 10% down I need to place 30% down… can he buy both and I buy from him on a private sale for 10% to place one in my name and finance the rest by my bank in Canada if not how can I legally or not so legally do this……

  16. Joe,

    Financing for Canadians is practically not available at this point. However, you can be on title even if you don't have the mortgage. So, lets talk about this and see what we can do. Feel free to contact me directly and we can discuss over the phone.

  17. Jay,

    Great article. We are also starting to see a fair amount of Canadians looking to purchase real estate here in the Santa Barbara CA area.

    Blog: http://www.SantaBarbaraRealEstateVoice.com

  18. Because of the problems of getting loans in Canada or in the US, many Canadians really do well buying a property where the seller is offering the financing. And there are more and more opportunities for buyers to get terms directly from the seller, even when there's an existing mortgage in place.

    Just closed a $2.4 million deal in Palm Springs with a Canadian buyer who put 10% down and got 6% financing from the seller.

    He got a good price and even better terms. Put that together with the exchange rate and it's a slam dunk.

  19. Hilda Defoe says:

    We are Canadians looking to buy a primary residence and have had the experience of loan officers telling us "no problem" and then finding out all kind of details after the fact. Luckily it did not occur close to closing and were able to get out of the contract but did spend about $1000 in fees as part of our learning. We were very specific about explaining our immigration situation well in advance but apparently the lender was not as knowledgeable as the underwriter. It was a waste of time and money. Then after the fact the loan officer told us we did not "disclose the info". We have applied for permanent residency 16 months ago and our petition is approved but we are waiting for a visa number. Short story we do not have a green card yet and won't for years to come which is exactly what I told the lender up front verbally and in writing. We had a TN and are in AOS process of obtaining the green card. They predict it will take 3-4 more years. We have been in the US for 5.5 years, have perfect credit, great credit score, and have more than 30% to put down. The homes we are looking at are in the 400,000-500,000 range. I have been working in the US for 2.5 years consecutively (2 years in Arizona). My husband was working in the US from 2004-2006 while I was in school, and then didn't work until Jan 2008 when he obtained work status again. Any options for us? What are your recommendations.

  20. Dear Hilda,

    You are perfect buyers in my book, and there are lots of options out there for you using one or more seller financing techniques, depending on the individual situation. Quit looking to the banks right now. You should be able to make an offer on any property that is not a short sale or REO.

    If a there's a regular (not corporate) seller, then you can ask them to become the lender for you. All they need is equity, good underlying financing, or some combination of the two.

    I love putting these types of deals together!

    **Dawn Rickabaugh – Note Queen´s last blog post..Very Scary Halloween Notes: Due on Sale (Santa?) Clauses</abbr></abbr>

  21. Hilda –

    I would have to disagree with Dawn's comment to some extent. While seller financing is certainly an option, limiting yourself to seller financing will greatly limit your available choices. Many sellers are simply not willing to carry financing.

    There is no question that the number of lenders able to loan to foreign nationals has been reduced, there are still some very good lenders able to make those loans.

    See this post: http://www.azmortgageguru.com/great-news-for-cana

    Let me know if you'd like specifics and contact info.

  22. Wade Fouts says:

    Great comments. I agree that seller financing can be a great option for both buyers and sellers in this buyers market if done correctly. As a real estate investor, I like offering seller financing at times, if the equity and underlying financing allow me the option to sell the note, if desired, for a reasonable price.

    Some sellers will use a note servicing company to facilitate everything more professionally. As a buyer, you can request one, also.

    Having other private lenders is also good to have because many sellers are not willing to carry financing as Jay mentioned.

  23. Tom says:

    A lot of the time, you can negotiate on terms for price. You might be able to offer the owner more than they wanted if they can give you favorable financing terms. The owner sees the higher offer as a success and might be willing to give you a better financing situation because of it.

  24. Rick says:

    HI, can you let me know the phone number and name of the CPA you know in Scottsdale you where referring to in this statement. Thanks. "Just to add to Jay’s point earlier. CPA’s are not as expensive. In fact I know a very good CPA in Scottsdale, who also happens to be Canadian. I would be more than happy to connect you if you so desire."

  25. Are these financing options still available today as I have clients that are interested in purchasing homes in Flordia as they are very affordable right now and they thing it will be a great investment.

  26. My guess is that most of the deals in Florida are offered by corporate sellers . . . bank owned properties taken at foreclosure. Seller financing doesn't work for short sales or REOs. If you can find a 'regular' seller who also happens to be flexible, there are options available for acquisition without new bank financing. There is a Canadian buyer currently looking in Los Angeles who has $200K down, but doesn't have a SS#, or any way to qualify for financing. I'm sure with a little persistence I'll be able to help him find a property he can get into.

    **Dawn Rickabaugh – Note Queen´s last blog post..A Note from Henry – Seller Financing Rescues Contract for Deed Castastrophe</abbr></abbr>

  27. Claudette says:

    My mother is wanting to purchase a house in the Casa Grande area as her primary residence. She has enough saved up to put 20% downpayment on a house she has been eyeing. However because she does not have a job lined up yet for when she moves there, she feels she will not get pre-approved and has therefor asked me to be a co-signer with her. We are also both Canadians. I know very little about real estate in general and was wondering if you could give me any advice on how to get started and what I should know. Thanks

  28. many says:

    I m canadian citizen, I would like to buy Subway business in USA with my Cousin, he is green card holder. He has already Subway Business.

    I am going to be just investor and he is going to operate the store.

    We both are ready to put 20% down each, so we are looking 60% business loan in USA.

    Would I be able to add my name in corporation with my cousin in USA.

    Corporation would be able to apply for business loan in USA.

    What can be happen, Please advice or reference your contact.

    Thanks in Advance

  29. leaseextension says:

    your information is very beneficial for me. Thanks for providing such useful information

  30. Guest says:

    your information is very beneficial for me. Thanks for providing such useful information.

  31. Are financing options still available now as I've clients that are interested in buying best homes in Texas as they are very affordable house right now and they thing it will be a great investment. For more Double Wides Repo Home Sale information visit here.

  32. underlying says:

    Nice post..i'm indonesian…if i want to buy a property at US…what should i do?is it same if i'm canadians?

  33. marcelleblanc says:

    I am interested in buying a house in Henderson, Nevada between 50-80,000 US with a down payment of $20,000 as a vacation home when we retired. Where is there financial available, rate, cost ect…

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