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   ARTICLE   |   From Scotsman Guide Residential Edition   |   September 2014

Are You Ready to Serve Borrowers From Up North?

Working with foreign homebuyers requires extensive communication and education

From title-related questions to issues regarding citizenship, Canadian clients typically have a lot of questions about buying property in the United States. If you’re interested in pursuing more business from Canadian foreign-national buyers, you’ll likely find two key circumstances to be true: first, that many Canadian clients have widespread concerns about nearly every aspect of cross-border homebuying, and second, that educating this niche market must become an integral aspect of your business if you hope to find success with these clients.

Despite fluctuations in both the Canadian and U.S. currencies, Canadian buyers continue to migrate south to purchase real estate. In fact, Canadians were the top foreign U.S. homebuyers in 2013, accounting for 23 percent of foreign real estate purchases, according to the National Association of Realtors. In addition, according to Living & Investing in Florida magazine, from June 2012 to June 2013, Canadians spent about $13 billion in residential real estate in Florida alone — 31 percent of the state’s foreign buyers during that period. Between 2009 and August 2013, foreign nationals spent about $50 billion on more than 250,000 properties in the Sunshine State.

"Originators should seek out lending partners that can use a client’s Canadian credit history to help secure a mortgage."

Although Canadians welcome the change in weather when they travel to Florida, Arizona and other popular hotspots, they are often unprepared for the change in financial dealings. Many of these customers are buying a second home or vacation property, and they are often unfamiliar with the U.S. mortgage process because it’s their first homebuying experience in the country.

Securing a mortgage can be a complicated process, and there are special considerations for Canadians purchasing real estate in the United States. Collaborating with local Realtors, attorneys and certified public accountants with expertise on both sides of the border is incredibly important in educating this niche market on the key considerations, benefits and pitfalls of U.S. homeownership. Seeking out specialized advice from a trusted network of cross-border legal, tax and real estate experts will help Canadian clients take the appropriate actions to minimize tax liability based on their financial status and family circumstances.

When working directly with Canadian clients, originators should keep a few major takeaways in mind. The loan process in the United States is different than the Canadian process in a number of respects, so originators should be prepared to acknowledge and explain those differences.

  • Timing: Although it takes about five days to apply for and secure a mortgage in Canada, your clients will need to know that it can take between 30 and 45 days in the U.S.
  • Documentation: In the U.S., securing a mortgage generally requires more documentation than in Canada because of the United States’ highly regulated environment.
  • Costs: Canadian homebuyers should know that costs in the U.S. may be higher than in Canada because of required third-party expenses such as property appraisals, titling and insurance matters. On average, Canadians pay between 3 percent and 5 percent in fees when financing property in the U.S.
  • Mortgage interest: In the U.S., mortgages are compounded monthly, while in Canada they are compounded semi-annually. In addition, mortgage interest may be deductible against taxes in the U.S.
  • Credit: Some Canadians have no U.S. credit or a very limited U.S. credit history, which may make it more difficult to secure financing. Finding a lending partner that specializes in and understands how to track foreign credit history is thus an important part of the process.

In regard to this last point, originators should seek out lending partners that can use a client’s Canadian credit history to help secure a mortgage. Ideally, originators should also work with lenders that do not charge foreign-national premiums to Canadian borrowers.

Ultimately, the most important step in helping Canadian clients secure a U.S. mortgage is investing the time to understand their priorities and concerns. Homebuying is a complicated process, but with the right partner in place, it can be a seamless — and even enjoyable — process for buyers making a second home in the U.S. Ongoing communication with foreign borrowers is the cornerstone of efficiently managing their expectations and providing the best service possible.  


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