While many countries prevent foreign ownership, the United States’ property sector is open to individuals of all nationalities. Even better, non-US residents who can’t afford to purchase properties in cash can apply for a US mortgage.
With its cross-border ownership via cash or mortgage open for non-US citizens, there’s no stopping Canadians from purchasing their own piece of American real estate anywhere in its 51 states.
According to market research company Statista, about 66% of Canadians who purchased properties in the US in 2020 paid for it by cash. Some paid for it through US mortgages (19%), other sources (6%), and home country (5%) mortgages. The remaining 4% of property buyers said they don’t know the source of payment.
This article will help you take a closer look at some of the questions about US mortgages for Canadians.
Reasons Why Canadians May Be Buying Properties In The US
From April 2017 to March 2018, Canadians collectively spent billions of dollars to acquire about 27,400 pieces of property, according to the National Association of Realtors.
These property buyers were either working or have businesses in the US, while others were investors who chose to rent out their property. Some are retirees, often called snowbirds, who come from the colder parts of North America and move to warmer places in the south. It’s not surprising then that more than half of the properties sold were located in Florida, Arizona, and California.
What Makes US Mortgages Attractive To Canadians?
In general, US mortgages offer longer terms, making the regular monthly amortizations for properties of the same value lower. Additionally, amortization payments for an American mortgage happen within the lifespan of the loan, while its counterpart far north requires mortgages to renew or refinance at the end of each term. Lastly, a mortgage is not tax-deductible in Canada, while a US mortgage may be deductible against income tax.
Who Are Eligible For A US Mortgage?
Canadians who earn taxable income in the US are eligible for a mortgage; however, they may be asked for additional requirements. Go to https://certifiedmortgagebroker.com/us-mortgage-for-canadians/ to find out more about the process.
Apart from Canadians, nationals from other countries may apply for a US mortgage subject to approval. Individuals who belong to the following classifications are usually eligible:
- Permanent resident aliens who have a green card and social security number, plus other application requirements, which may vary depending on the state or lenders.
- Non-permanent resident aliens who don’t have a green card but have social security number may be eligible, provided that the person has a work permit or an employer-sponsored visa that’s good to least for three years or longer.
- Immigrants who are refugees or were granted asylum and have a source of income.
- Foreign nationals may avail of mortgage loans offered by some private lenders but they have high-interest rates and high down payment requirements of up to 50%.
How To Increase Your Chances Of Getting Approved For A Mortgage
As expected, non-permanent residents have limited mortgage options. Government-supported agencies like the Federal Housing Authority, the Federal Home Loan Mortage Corporation (Freddie Mac), and the Federal National Mortgage Association (Fannie Mae) are their only options. These agencies offer as low as 3% down payment but they do have strict conditions.
The main issue confronting non-resident mortgage applicants is the lack of credit history. This is critical in the mortgage application process, and even residents need to work on rebuilding credit scores to get home financing approval. Some lenders work around this by checking non-traditional reports, which may include utility and rental payment histories, as well as savings or other deposit transactions.
Canadians can increase their chances of getting approved for a US mortgage by speaking to a Canadian lending institution that also operates in the US. These banks may provide better interest rates and faster approval for Canadians who have good credit standing in their home country.
Types Of Mortgages In The United States
Depending on their capacity to pay, among other considerations, Canadian applicants can choose from among these types of mortgages:
- Fixed-rate mortgage: The interest rate on the loan doesn’t change for the entire loan period. This was the only mortgage type offered in the US for several years. In the old days,the repayment rate typically lasted for 30 years. Whereas in Canada, it’s typically five years.
However, these days, it seems that only very few lenders offer fixed-rate mortgages as an option.
- Variable-rate mortgages: Also called adjustable-rate mortgages (ARMs), these types of mortgages have fluctuating annual interest rates. The US housing boom gave birth to this mortgage type, where non-qualifying lenders were forced to gain approval for mortgage loans. This caused lending companies to adjust for them by offering lower rates and shorter reset periods.
- Hybrid-rate mortgage: As you may have guessed from the name, this type offers interest rates that combine the first two kinds of mortgages. It typically starts as a fixed-rate mortgage for a few years and then becomes a variable-rate mortgage.
Final Thoughts
Mortgage institutions and government-backed lenders have different requirements and mortgage products available to non-US residents. Additionally, mortgage conditions vary for these types of mortgage applicants, depending on the state where they are located. If you want to get approved or have a seamless experience, do your homework and seek the advice of professionals.