Guide to U.S. Mortgages for Canadian Citizens

If you are a Canadian looking to diversify your real estate investment portfolio or simply make the right move by investing in the U.S. property market in 2024, you are at the right place.

But can Canadians buy property in the U.S.? Absolutely Yes! – Canadian Citizens can get a U.S. mortgage through America Mortgages.

Now that’s out of the way, in this blog, we will equip you with all the necessary information to decode the rules around U.S. mortgages and secure a piece of the great American property pie.

What is the eligibility for Canadian citizens to qualify for a U.S. mortgage?

While Canadian citizens can get a U.S. mortgage, what is the eligibility for Canadians to get a U.S. mortgage? 

This list is simple: you are eligible if you have a good Canadian credit history (no U.S. credit is required), sufficient proof of income in Canada, and a completed mortgage application. After lenders review your documents, if you qualify, a Pre-Approval Letter will be issued. Although the application and pre-approval can be completed quickly, the entire mortgage process, from application to signing, may take up to 30-45 days.

What are the differences between getting a mortgage in Canada versus the U.S.?

While one can obtain a U.S. mortgage, some differences are worth noting. Knowing these differences will help you level the playing field and better navigate the documentation.

Here are the key differences between getting a mortgage in Canada versus the U.S.:

Mortgage Processing and Approval Times:

In Canada, mortgages are processed and approved within 5 to 10 working days. In the U.S., the average processing time is 30 to 45 working days or longer.

Documentation:

In Canada, there is an extensive requirement for documents if you’re buying a second home or an investment property. Applications for U.S. mortgages require far less. Especially if you’re buying an investment property, you can often qualify only on the rental income of the property, meaning there is no requirement to provide your personal income documents for Canada. If you think about it, it actually makes much more sense since the property will be utilized as a rental and should qualify based on the rental income debt servicing capability.

If you’re looking to buy a holiday home that you will not rent out, you will be required to provide two years of your Canadian tax returns, pay statements, and the other standard requirements for a loan in Canada. Unlike an investment mortgage, which qualifies on only the rental income, you’d need to be able to carry your Canada housing debt along with your U.S. housing debt within a certain debt-to-income ratio. 

Mortgage Interest:

This is one of the most significant differences and one of the key reasons why the U.S. property market is an important investment for Canadian citizens. Mortgage interest in Canada isn’t tax-deductible, whereas, in the U.S., it may be deductible against rental income tax. 

In addition, fixed-rate mortgages in the U.S. are compounded monthly, whereas in Canada, they can be compounded semi-annually.

Down Payment:

Down payments in the U.S. are higher, with a standard requirement of at least 20% of the home value for a U.S. passport holder and 25% for a Canadian passport holder. Canadian applicants can expect similar down payment requirements for conventional mortgages. However, mortgage insurance allows for down payments as low as 5%.

Amortization:

In Canada, the offer terms range from 1 to 5 years, whereas in the U.S., mortgages can be as long as 30 years with a locked-in rate. There are even options for 40-year amortization, which can not only give you the assurance of how much you’re paying for the next 40 years but also give you the best yield opportunity with a long tenure. 

Closing Costs:

Closing costs in Canada are driven by land transfer taxes and legal fees and range from 2.5% to 3% of the purchase price. In the U.S., closing costs vary more widely and often include state taxes, title insurance, and a 1% to 2% origination fee.

Benefits of U.S. Mortgages for Canadians

Now that we are clear on the eligibility of Canadian citizens to get a U.S. mortgage and some of the key differences between the mortgages in Canada and the U.S. let’s understand some of the benefits of obtaining a U.S. mortgage as a Canadian citizen.

Lower and Flexible Interest Rates:

In many cases, U.S. mortgage interest rates are lower compared to Canadian rates, offering the potential for reduced borrowing costs over the life of the loan. 

In addition, Canadians will find more favorable terms, such as fixed-rate mortgages and adjustable-rate mortgages, both of which offer the flexibility to choose the repayment option that best suits their financial goals.

Great Investment Potential:

The U.S. property market is a great way to diversify your investment portfolio. The real estate scenario in the U.S. is vast, offering opportunities for capital gain and great rental income. Moreover, such diversification potentially increases overall portfolio health.

Tax Benefits:

The interest paid on a U.S. mortgage may be tax-deductible against the U.S. income tax, which in itself is a great benefit for Canadian investors.

How Can Canadian Citizens Obtain a U.S. Mortgage?

Join thousands of other Canadian investors who have used the services of America Mortgages. If you’re interested in learning more, reach out to us at [email protected] or visit our website at www.americamortgages.com. Additionally, if you’d like to schedule a commitment-free meeting with one of our U.S. loan officers to explore your U.S. mortgage options further, you can do so using our 24/7 calendar link.

FAQs Around Obtaining a U.S. Mortgage as a Canadian

Do I need a U.S. credit history to get a mortgage in the United States as a Canadian?

No, as a Canadian citizen, you don’t need a U.S. credit history to qualify for a mortgage.

Can Canadian citizens buy property in the United States without being residents?

Yes, Canadian citizens can buy property in the United States without being residents.

Are there any special considerations or challenges for Canadian citizens applying for a U.S. mortgage?

The major challenge when applying for a U.S. mortgage is to understand the differences in the process, especially the cross-border tax implications. Working with America Mortgages can help you ease this process a great deal.