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What to know about buying property in the U.S.

June 23, 2023
5 mins
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By and large, Canadians are the most common foreign buyers of property in the United States. In 2022, Canadians accounted for 11% of the total foreign buyer pool and spent $5.5 billion on U.S. property.

One reason for this is the lower home prices in the U.S. that offer more value than the Canadian dollar.

On paper, it might seem like a smart move. But much of the decision has to do with a potential buyer’s long-term goals and whether they can handle the upkeep of an asset outside of their home country. There can also be a few hoops to jump through before closing in order to reap the benefits of owning property on U.S. soil. Here’s what to keep in mind.

Can Canadians get a cross-border mortgage in the U.S.?

Whether the purpose is to find a part-time home or to make an investment, Canadian citizens are legally able to purchase property in the U.S. However, there are some extra requirements Canadians have to meet to make the purchase, says Amanda Smart, mortgage agent at Axiom Mortgage Solutions. The first one? A Taxpayer Identification Number (TIN) from the IRS, which is their version of the Canadian Social Insurance Number (SIN).

“The process of getting this can take some time, so it’s advisable to get on top of it well before the tax filing deadline or when you need to complete any financial transactions,” says Smart.

Applying starts with completing Form W-7 and gathering any personal documentation needed to carry out the application. “Once you’ve received your number, it can be used to file taxes for your property in the U.S.,” says Smart.

If the home is intended to be used as an income property, “you would just have to educate yourself on the local laws and regulations, and any rules associated with the community and location,” says Smart. “That includes any permits or licenses on both short and long-term rentals.”

Related: Is it smart to invest in property right now?

What’s the minimum down payment for foreign buyers?

Typically, foreign buyers are expected to pay higher down payments.

“A minimum 35% down payment is required for foreign buyers,” says Smart.

However, options vary depending on if a Canadian’s primary residence is in the states or in Canada. For example, if the buyer is a U.S. resident and plans to use the property as their primary residence, they can benefit from more flexible credit requirements and a lower down payment by borrowing with the Federal Housing Administration (FHA). But, if they’re a Canadian living in Canada just hoping to use the property occasionally, they’re subject to standard borrowing.

All financing has to go through a U.S. lender, but there are mortgage products that Canadian buyers can turn to.

For example, Smart recommends that buyers look into a foreign national mortgage, which is designed for those that don’t have a U.S. credit history. Qualifying for this type of mortgage can be based on an international credit report. There are also cash-flow mortgages, which can be granted based on the likelihood of the property’s rental value covering monthly payments.

But Canadians still need to produce documentation similar to what they’d need for a Canadian mortgage, which may include:

  • credit history,
  • recent pay stubs,
  • letter of employment,
  • confirmation that taxes are paid and up to date, and
  • proof of at least two years of income from a Notice of Assessment or T1 General income tax form.

Choosing the best lender for your U.S. mortgage

Before choosing a lender for a U.S. property, buyers should weigh other factors into their decision, including the location, income come level of the buyer, purpose of the home, plus the current market in the state of interest.

Once those have been determined, it’s helpful to compare mortgage rates for the property type, down payment amount, and home cost. Getting a quote can get the ball rolling and connect potential buyers with a broker who can help them apply for a U.S. mortgage.

Canadian banks like RBC and BMO have programs that can streamline the process to getting a U.S. mortgage, making the journey a little easier.

“At the end of the day, there are a lot of diverse scenarios that come into play when deciding to buy foreign property,” says Smart. “Ensure that you’re always consulting with a professional and doing your own research to ensure a stress-free and successful purchase.”

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Engaging a mortgage broker before renewing can help you make a better decision. Mortgage brokers are an excellent source of information for deals specific to your area, contract terms, and their services require no out-of-pocket fees if you are well qualified.

Here at RATESDOTCA, we compare rates from the best Canadian mortgage brokers, major banks and dozens of smaller competitors.

Michelle Bates

Editor and Writer

Michelle Bates is an editor and writer in the personal finance space. She has seven years of content writing experience.

She has a Bachelor of Arts (Honours) degree from Queen's University in English Literature and Sociology along with a Publishing - Book, Magazine and Electronic graduate certificate from Centennial College. Michelle specializes in personal finance content, including mortgages, home, auto, and travel insurance, and credit cards. Her work has been covered by notable Canadian news sources like the Financial Post, the Globe and Mail, CTV News, and Narcity.

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