US Mortgage for Canadian Citizens – Complete Guide

There are a lot of Canadian citizens looking to buy property in the US, and their number just keeps rising. In the past 10 years, more than half a million Canadians have bought property in the US, and it doesn’t seem like this trend is going to stop. In 2023, Canadians were among the top five foreign buyers of residential property in the US – which is why they want to know what is the best US mortgage for Canadian citizens. Whether they’re buying a vacation property, a primary or second residence, or making a real estate investment, one thing is for certain — numbers don’t lie, and Canadians like buying real estate in the US. 

If you’re one of them and are buying a specific property in the US, you should probably familiarize yourself with US mortgage loans. Mortgages are one of the best ways to finance properties and are great for making homeownership more accessible. They also help people build their assets and portfolios and to accumulate and create generational wealth. 

Can a Canadian Get a Mortgage in the US?

Let’s start with the most obvious question first – Can Canadians actually get a mortgage loan in the US? The answer is simple, yes they can. In fact, Canadians who are looking to buy property in the US will be better off getting a US mortgage. This is mainly due to the interest rates in Canada being higher and sitting at 7,25%, as opposed to 5,25% in the US (at the time of writing this article). 

Canadian citizens have collectively spent more than 6,5 billion US dollars purchasing real estate properties in the US, in 2023 alone. And, a big chunk of that money came from US mortgages. 

Florida is, by far, the most popular state amongst Canadians. Over half a million Canadians own property in Florida, and the number just keeps on rising.  Now, let’s review the main reasons why Canadians are buying property in Florida and the US in general.

Why Do Canadians Buy US Property?

The main reasons why Canadians purchase US property include:

• Buying vacation homes — Canada is a great country but is not known for its great weather, unlike many places in the US (California, Florida, etc). For that reason, many Canadians buy vacation homes in the US, so they can have a place to visit when the Canadian winter kicks in.
• Buying retirement homes — Many Canadian retirees just want to move to Florida or California and spend their days enjoying the wonderful beaches and warm weather. The US also has many retirement communities, and, for those Canadians looking to get more for their money, certain places in the US have a much lower cost of living than Canada does.
• Investing in real estate — A lot of Canadians buy real estate in the US as a way of generating passive income through rent. 
• Buying a primary residence — It’s a good idea for those Canadians that are planning to move to the US or are currently living there, to buy a house in the US.

Types of US Mortgages Available to Canadians

There are many different types of US mortgages that are available to Canadians. The most popular ones are:

Foreign National Mortgage Loans

Foreign national mortgage loans are non-QM loans that are widely available to all nonresidents, (including Canadians) who want to buy property in the US. They usually have higher down payment requirements (around 20-25%) when compared to other types of mortgages, but require far less paperwork and have much faster closing times. These types of loans are available to Canadians looking to buy investment and vacation properties, as well as those looking to make a permanent move from Canada to the US and purchase a primary residence.

DSCR Loans

Debt Service Coverage Ratio or DSCR loans are solely available to those Canadians looking to invest in real estate (e.g. purchase rental property). The way this loan works is by using the income a specific property is able to generate (via rent) in order to, basically, pay for itself. Before approving this type of loan, Lenders will first calculate the DSCR of a property and will use that metric to determine whether or not to approve a particular loan application. Additionally, important things to note is that DSCR loans have higher interest rates (than conventional loans) and will usually come with a down payment requirement between 20-25%.

Conventional Mortgage Loans

Conventional mortgage loans usually have a bit lower interest rates than other types of loans, but are more difficult to get, especially if you are not a US citizen. These loans are backed by the government and come with a lot of requirements, including;

• US credit score of at least 620;
• Employment history in the US;
• Social Security number (SSN);

The down payment for conventional mortgage loans varies a lot and can be between 3-20%, depending on the lender and the exact circumstances of each case. For the most part, if all conditions for this type of mortgage are met, lenders will approve a loan of up to $726,200 for a single-family home. Other types of properties (commercial, condominiums, etc.) will have different limits on loan amounts.

Hard Money Loans

Hard money loans are mostly offered by private lenders. The way they work is — lenders will put up a property the borrower wants to purchase as collateral. The closing times for these loans are usually quick, they have fewer requirements and require less paperwork than traditional mortgage loans. On the other hand, hard money loans have higher interest rates, usually between 10-20%, and will usually require a downpayment between 25-35%.

FHA Loans

The FHA or The Federal Housing Administration loan is a type of mortgage insured by the US Department of Housing and Urban Development. These loans have really low down payment requirements that can go as low as 3,5% and are aimed at making homeownership more accessible as a whole to US residents. And, the last part is the biggest downside of FHA loans – to get approved for one you need to either be a US citizen or resident (e.g. have a US visa). But, if you are a permanent resident in the US here’s what you can expect from FHA loans:

• Low credit score requirement (even those with a 500 score may be eligible to get a loan);
• Loan limits are set according to the median home prices in the area where the “desired property” is located;
• All properties have to meet certain FHA safety standards. If they don’t, the mortgage won’t be approved;
• The minimal down payment of 3,5%;
  

ITIN Mortgage Loans

ITIN mortgage loans serve as a practical alternative for Canadian citizens aiming to invest in US real estate. Issued by the IRS, the Individual Taxpayer Identification Number (ITIN) allows Canadians to apply for these specialized loans tailored to non-US citizens. Unlike conventional mortgage loans, ITIN loans feature distinctive terms and conditions, making them more accessible for foreign investors. With potential benefits such as accommodating terms and efficient processing, working with lenders experienced in cross-border transactions becomes crucial for Canadians navigating the intricacies of the US real estate market.

Mortgage brokers will connect you with the best lenders.

Main Differences Between US and Canadian Mortgages

There are a lot of differences between US and Canadian mortgages — from the application process to specific terms and closing times. The most notable differences include:

Document Requirements 

Because of differences in regulatory requirements, US mortgage loans usually require more paperwork than Canadian loans. For the most part, to get a mortgage loan in Canada you’ll need the following:

• Agreement for purchase and sale;
• Down Payment confirmation;
• Job history or proof of income;

On the other hand, in the US, documentation to get approved for a loan is much more extensive and can include: 

• Bank statements;
• Tax returns;
• Documents about other investments;
• Documentation about assets;
• Insurance documentation;
• Property and mortgage statements (for those that have it);
• Job history;
• Credit score;
• Proof of income; 

Interest

In Canada, interest on mortgage loans can not be used as a tax write-off. In the US the story is a bit different. Depending on the exact type of mortgage and where or not a property you bought is generating income, the interest can be deducted for tax purposes. 

Additionally, the ways interest is calculated in Canada and the US are different. For example, fixed-rate mortgages in Canada are compounded twice a year (semi-annually), while in the US they are compounded each month. 

Down Payment Requirements

One of the biggest differences between US and Canadian mortgages is the down payment. In the US, down payments are usually bigger and are on average anywhere between 15-25%, and can sometimes be even higher (depending on the specific type of mortgage loan). 

In Canada, down payments for standard mortgages can be about 20%, unless a borrower has a Canada Mortgage and Housing Corporation (or CMHC) insurance. With that type of insurance, mortgage loan down payments in Canada can be as low as 5%, and even 3% for first-time homebuyers.

Costs of Closing

Another difference between Canadian and US mortgage loans is the costs associated with closing the deal. In Canada, those costs are usually around 2-3% of the property’s value. In the United States, the closing costs range between 1-3% of the purchasing price. 

How Does Residency Affect US Mortgages for Canadian Citizens

The requirements of various mortgage loans will depend on your residency status. This means that, based on your residence status, you’ll be eligible to get different types of loans. For the most part, Canadians will be in one of the 3 categories:

• Permanent residents with valid green cards — If you fall in this category, you’ll pretty much be able to get mortgages as if you were a US citizen. This means that FHA loans, (that have really low down payment requirements), will be available to you, along with Fannie Mae and Freddie Mac loans (mortgage companies created and backed by US Congress). 
• Temporary resident with a valid work visa — Canadians that are in this category, more than likely have an SSN (social security number) but don’t have a valid green card. With an SSN you’ll be able to open a private US bank account which will allow you to get and work on your US credit score. It will also open the doors to many different mortgage types (e.g. conventional loans).
• Foreigners (i.e. Canadians) that don’t reside in the US — If you fall into this group, you’ll be able to get any number of different Foreign national mortgage loans.

We are the best mortgage brokers that can help you get the best loan deals, no matter what your residency status is.

US Mortgage for Canadian Citizens – Essential Tips

Over 44% of all foreign nationals that buy real estate in the US are paying for their properties directly in cash. If you are not one of those people who just happen to have a couple of hundred thousand dollars laying around, you might want to start looking at US mortgages.

Although getting a US mortgage as a Canadian might be difficult, it’s far from impossible. With the right mindset and some helpful tips, there’s nothing you can’t do. And, to get a mortgage in the US, you should:

1. Check Your Documentation

To make it easier on yourself, be sure to check all the documents that you might need in order to get a US mortgage. Also, make sure you have:

• Valid Canadian passport;
• If you have a green card or a work visa, make sure they are valid.
• Documentation about your job history or documents that prove your income;

2.  Prepare the Down Payment

Mortgages in the US usually require a higher down payment, when compared to those in Canada. So, for that reason, make sure you have enough funds to cover the down payment, before you even start looking for financing options. The down payment in the US can vary greatly, depending on the exact type of mortgage, so be sure to check all the details and cover all the bases before you move forward.

3. Understand Currency Exchange

Although they are both called “dollars” the Canadian and US currencies have different values. The US dollar is stronger and is worth more. So, make sure you understand the currency exchange and check the currency exchange rates before you start the process of buying property in the US.  

4. Enlist Professional Help

Navigating through all the challenges of the US real estate market and getting a US mortgage, can be troublesome, especially for newcomers. The ways and methods to obtain mortgages in the US are different from those in Canada, along with interest rates, taxes, closing costs, and much more. That’s why it’s important to hire someone who possesses extensive knowledge about all of the above, and also knows how to guide you through the entire process from start to finish. We at NRI, specialize in dealing with foreign nationals and we’ll be happy to assist you with any number of things as they pertain to purchasing US real estate, including connecting you with certified realtors with expertise in dealing with Canadian buyers.

FAQ

How much money can Canadians borrow from US mortgages?

There’s no specific amount or limit as to how much money Canadians can borrow from US mortgages. It will all depend on the specific type of mortgage. 

For example, Canadians interested in buying rental property can easily get DSCR loans. This mortgage has a minimum loan amount of $150,000 and a maximum of $5,000,000.