01 Jan Are you a Canadian buying a house in the USA? Here’s my Personal Experience
Here is a comprehensive guide for Canadians buying a house in the USA. It includes what I learned from my first home buying experience and what I would do differently next time. I bought a house in Orlando, Florida, just ten minutes away from Orlando’s Universal and Disney World. Whether you’re buying a second/vacation home or an investment property, the process is relatively the same. Purchasing a house in America might actually be a bit less complicated than Canadian house purchase. In fact, you don’t even need to be in the US to buy a house there.
Know which type of home you want
Do you want a second/vacation home or an investment property? This matters because there are some locations or communities that don’t allow vacation homes. A second/vacation home means you will live there for half a year at least. In the other six months of the year, you can either keep the house empty or have tenants move in on a short-term rental.
The issue for most communities is having short-term rentals, which are less than one year. Check which type of homes are allowed with the builder beforehand. My community is gated and does not allow short-term rentals for instance. If you’re going to have tenants, their lease needs to be at least a year long. Otherwise, there are going to be issues with the Homeowners Authority (HOA) when your tenants go to register as they’ll see your tenants are breaking community rules.
If you’re choosing an investment property, keep in mind which type of investment you’re looking for. Do you want long-term tenants in the house or are you planning to have an Airbnb property, which can by quite lucrative if your house location is near a tourist destination like Disney World. If you’re going to have an Airbnb location, it’s best to bear in mind a community that allows this, as Airbnb falls into the short-term rental category as well.
Do you need a realtor?
Yes. But my home buying process in the USA was not like that in Canada, where many homebuilders will only work through a realtor. In fact, I didn’t get a realtor until after I had decided on the house and spoken with the builder about buying it. To be quite honest, I wasn’t even going to have a realtor until I called a few realtor companies in Orlando to ask a couple questions about buying a house. The realtor sort of fell into my lap this way and she ended up coming super clutch throughout the mortgage experience and was great for answering any questions I had.
Mortgage pre-approval process
As a Canadian, your first American bank option for your mortgage loan should be TD Amitrade. Representatives from all different American banks and financial institutions themselves told me to go with TD as they offer the best mortgage rate for Canadians, and that they did. The information TD asks for is fairly similar to what they’d ask for in Canada: ID, income, SIN, years of employment, what type of house is being purchased etc. You’ll receive your pre-approval in moments. Try to call ahead and make an appointment at the bank instead of walking in. Make sure you receive a printed copy of your pre-approval before you leave so you can give it to the builder when you sign the house purchase contract.
Home buying process
I looked at and decided on a few of the houses back in Canada. I had also called the homebuilder and asked him quite a few questions on the houses there. When I landed in Orlando, I knew exactly where to go and didn’t waste any time. I looked through different model homes in the community I wanted and decided on one on the spot.
For the contract signing, I had the realtor join me. I signed the contract in the builder’s office and caught my flight back to Canada the same day. The builder will read through the contract and have you sign a DocuSign. I didn’t have a lawyer read it over beforehand, so it was a relatively quick process. Just make sure of the timeline for cancelling the house without going into buyer default in case you decide you don’t want the house anymore.
Mortgage loan process
This is the part where I felt most thankful for having a realtor. Although I was pre-approved for a mortgage back in January, COVID-19 messed up the process. For one, my mortgage co-signer, my mother, was furloughed from her job so underwriting rejected our application just a month before closing. Here I was in a contract to purchase the house with no way to pay for it.
If this ever happens (God forbid), you do have a couple options:
1. Apply to other banks obtain a mortgage from elsewhere, although you will likely receive a higher mortgage rate than TD’s offer, but still, it’s better than going into buyer default. You can ask the loan officer from that bank to speak with the builder and they will figure something out to extend your closing date until you have an approved mortgage.
2. Go with the builder’s financing option. The builder’s rates will be through the roof, but still this will be better than forfeiting the contract. If closing time comes, and you don’t have a mortgage, you will go into buyer default where the builder will cancel the contract and keep your down payment. This is certainly not an option as you don’t want to lose thousands of thousands of dollars. Always read the home purchase contract to see when you are able to cancel the house purchase with no penalty. For me, it was 30 days from the contract signing and I had my mortgage rejected well past that.
My realtor had my back in this case and she took over contact with my TD loan officer, which was great as she was more knowledgeable about the process. Thankfully, my mother was called back to work a few weeks later. I did have her as a co-signer after all and we did have our mortgage approved, albeit well past the closing date. Our builder was (unhappily) flexible and quite irritated with the loan officer as well, but did go along with the process.
Close and sign papers with the title company
This is a process in itself. I initially assigned two power of attorneys (POA) from the title company, First American, to sign on mine and my mother’s behalf since we were in Canada,. My realtor could not act as my POA as it would be conflict of interest. To assign the POAs, I was required to print out the authorization forms emailed to me from First American, have them notarized and email them back. However, my mother didn’t trust anyone to sign on our behalf while we weren’t there, so I booked a flight to Orlando to sign the papers myself. I still had to have an authorization form notarized for me to act as a POA on my mother’s behalf.
I booked Florida for only a week and assumed everything would be done the day I arrived in Orlando, however TD had other plans. By the time the house actually closed I was nearing the end of my Florida trip and I was irritated that my trip may have actually been for nothing. However, TD finally closed on our house and I was required to go to First American’s office to go through and sign a thick stack of papers. A First American representative sat me down to go through every single paper before I signed each one. The papers detailed our mortgage loan, taxation and a myriad of other information. We were also short ten dollars for our closing costs, but they let that go (there was a conflict between the exchange rate I saw and their exchange rate.
Receive the house keys
After signing the papers, First American asked me to return after they had processed the signed papers. An hour later, I received a call them from them and returned to collect a folder of all the papers I signed and the house keys. At last.
What I would do differently
One thing I would do differently research more on the location where I want to buy a house. I didn’t realize how exorbitant property tax is in Orlando. Also be mindful of the exchange rate and how much you will really need to close on a house. In the end, I ended up paying $5000 more on closing costs than what I had calculated. When it comes to house closing, you never know how what other fees a bank will add in. You’ll see the final closing costs on the day of and you’ll need to make the wire transfer right away. Also, be weary of the methods of payment allowed. I hadn’t read properly that cheques were not an acceptable form of payment for closing so I called my mom to make a wire transfer immediately. from Canada. She had to leave work to do it since I was in Florida and couldn’t access my bank.
Negotiate with the builder. I was so set on purchasing the house that I didn’t negotiate a single thing. My house did not come with a refrigerator or garage door opener. I should have made that a buying factor for the builder initially. As you can tell, this house was purchased on a sort of whim. Now that I know the home buying process, I would research every aspect carefully.
I’d buy a house in America again
This experience taught me a lot about what it takes to purchase a home. I now understand why they say buying a house can test a couple’s relationship; I’m glad I first bought a house while single. I’d be careful with who you decide to purchase a house with if it’s anyone besides your spouse. It takes an immense amount if patience and understanding that nothing is in your control. You have to learn to go with the flow. Also, house buying rules are not rigid—when you walk into trouble, there will be someone who is flexible with the rules to accommodate your troubles, whether it be the builder or the loan officer. You realtor should be by your side helping you through everything.