Foreign Nationals

Buying property in the U.S as a Canadian

By Milo

January 29, 2024 6 min read

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Buying property in the U.S as a Canadian

Canadians are increasingly attracted to the U.S. real estate market, driven by its robust investment opportunities, diverse climates, and lifestyle options. The appeal extends beyond geographical proximity, as U.S. federal laws provide a welcoming environment for foreign nationals, including Canadians, to purchase property. This guide highlights the pathways to ownership, focusing on the types of properties Canadians can invest in and the financing plans available to foreign nationals. By simplifying the purchasing process, we aim to empower Canadians with the knowledge needed to navigate the U.S. property market confidently, turning investment dreams into reality.

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At Milo, we specialize in guiding Canadians through the intricacies of investing in U.S. real estate, particularly focusing on those who seek investment properties without planning to reside in the U.S. full-time. Understanding your residency status is the cornerstone of this journey. Canadians, whether on temporary visas or as permanent non-citizens, have distinct opportunities in the U.S. property market, largely influenced by their residency status. For Canadians not intending to live in the U.S. full-time, investment properties and vacation homes become viable and attractive options, supported by Milo's expertise in financing such ventures.

With residency considerations in hand, our Canadian clients can explore a wide array of property types. The U.S. market is open to foreign nationals purchasing investment properties and second homes, with no federal ownership restrictions​​. Financing these investments typically requires a substantial down payment, often more than 30%, reflecting the commitment to a non-primary residence.

Prime locations such as Florida, New York, and Texas are particularly appealing, offering high rental demand and the potential for consistent passive income. Understanding your residency status and the type of property you are eligible to purchase is the first step. With this knowledge, selecting a location that meets your investment and lifestyle goals becomes significantly easier, ensuring a successful venture into the U.S. property market.

Exploring Non-QM mortgage programs for Canadian investors

For Canadians looking to invest in the U.S. real estate market, understanding the nuances of different non-QM mortgage programs is crucial. These specialized loan options offer flexibility beyond traditional mortgage criteria, making them particularly appealing for international buyers. Here's a closer look at three key non-QM mortgage programs offered by Milo and how they cater to the needs of Canadian investors:

  • Income-Based/Full Doc Program The Income-Based Program is ideal for those with verifiable income streams and a solid financial standing. It scrutinizes income sources, from salaries to investment and rental incomes, assessing the ability to repay the loan. The Debt-to-Income Ratio (DTI) is critical, indicating financial health through the percentage of income dedicated to debt repayment. Assets and collateral, including additional properties and savings, are also evaluated, providing security beyond regular income. This program offers competitive rates within a 30-year mortgage framework, appealing to investors with robust financial profiles.

  • Rental Income-Based/DSCR Loan Tailored for properties with high income-generating potential, this program focuses on the property’s revenue capabilities. It examines the monthly rental income after expenses, assessing the property’s contribution to mortgage servicing. The Debt Service Coverage Ratio (DSCR) measures available cash flow for debt payments, with a DSCR over 1 indicating sufficient income to cover loan payments. Asset evaluation complements this assessment, ensuring a comprehensive financial overview. This option includes the stability of a 30-year mortgage, suited for those prioritizing property income.

  • Bridge Financing For investors with immediate financing needs, bridge loans provide short-term solutions. These loans use the property as collateral, emphasizing its value for loan support. A key component is the exit strategy, detailing repayment plans through property sale, long-term financing acquisition, or other methods. Bridge loans, given their specialized and temporary nature, may carry higher interest rates and typically span 1-2 years.

The mortgage process on a U.S. property for Canadian investors

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Navigating the U.S. real estate market as a Canadian investor involves several key steps, from selecting the right lender to successfully closing on your property. Here’s a streamlined overview of the process once you’ve found a property and made an offer:

Research and select a lender: Start by identifying lenders experienced with international clients, focusing on those offering loan programs tailored to foreign investors. Milo, as a specialized direct lender, provides customized financing solutions for Canadians looking to invest in the U.S. market.

Loan processing and underwriting: Upon acceptance of your offer, your loan application moves into processing and underwriting. The lender reviews all documentation in detail to finalize the loan terms.

Appraisal and inspection: An appraisal is required to confirm the property’s value, while an inspection assesses its condition. These steps are crucial for ensuring the investment is sound.

Closing: The final step involves signing a multitude of legal documents to transfer ownership and finalize the loan. Closing costs, which include various fees, will be settled at this time. International investors may often complete this process remotely.

Streamlining U.S. property investment for Canadians For Canadians eyeing U.S. property investment, partnering with a specialized direct lender like Milo can significantly streamline the process. Milo's tailored financing solutions cater specifically to the unique needs of international investors, simplifying the journey from application to closing. By focusing on strategic property selection and leveraging expert guidance, Canadian investors can navigate the U.S. real estate market with confidence, unlocking opportunities for growth and diversification in their investment portfolios. With the right approach and resources, the dream of owning U.S. property is well within reach.

The opinions expressed in the Blog are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security or investment product.

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