Steps for Canadians to Try to Obtain a US Mortgage

Obtaining a US mortgage is not easy, but it is not impossible.  It takes time, hard work, and is a complex process.  If you are thinking of obtaining a US mortgage for your US real estate property purchase in Florida, you need to start early as the process takes a lot longer in the US than in Canada (up to 60 days for a US mortgage!).

US mortgages can often require a deposit of 60% or more, which defeats the purpose of the US mortgage in the first place. US mortgage rates are very low, but it’s still difficult for Canadians to obtain a US mortgage as a financing option.  The main reason it is difficult to obtain a US mortgage is that US banks do not take a deep look at the Canadian credit history of Canadians, as a result, without looking at this, it makes it difficult for them to approve your credit based on your US credit information, which is likely nothing.
Obtaining a US mortgage requires documentation preparation (far more than in Canada), lots of time (process is shorter in Canada), and is more costly (cheaper in Canada).

 

Summary of US Mortgage requirements:

• Title Insurance.  Banks want to know that the title is clear on the US property.  Without clear title, you cannot obtain a mortgage.

• Appraisal.  An appraisal is needed before you can obtain a US mortgage because banks want to estimate and value the US property.  They will loan you an amount based on the total value of the real estate.

• Property Survey.  This may be required to establish the legal boundaries of the real estate property.

• Insurance.  Depending on the location of the real estate property, you will need to obtain hurricane and flood insurance.  Florida can be prone to hurricanes and the lenders want to ensure that the homeowner and the lender is protected.

 

Step 1 – Apply for a US Mortgage Loan

It is time to pick up the phone and to start making calls with a mortgage loan officer.  This can be to a mortgage banker or a mortgage broker.  A mortgage banker, after reviewing the information you have provided them, can give you an initial indication if you will receive a US mortgage.  Whereas, a US mortgage broker, like Canadian brokers, need to send out this information to various lenders, which will provide a reply to the mortgage broker.  This process seems similar to that in Canada.

When you meet a mortgage loan officer, they will discuss the following:

• Financing Needs
• Product Options
• Explain how different payment options affect your payments, interest rates, and principal reductions

 

Tip: You may want to consider going with a local specialist that knows the area and is familiar with any potential issues that may arise due to the location or banks.

After discussing the details of your application, you will receive a Good Faith Estimate and disclosures that will outline the costs associated with obtaining the US mortgage loan and also the loan structure.  Please ensure you obtain the Good Faith Estimate in writing and keep this for your records.   You will also receive a truth-in-lending statement, which will outline the costs of the loan, APR, and other terms.  If you are receiving an adjustable rate mortgage, you will receive disclosure information about ARM’s as required by Federal Law.  Lastly, you will receive a guide to settlement costs booklet, outlining the settlement process and associated costs.

When you apply for a US mortgage, you will be asked to complete a  Uniform Residential Loan Application.  The purpose of this document is to gather information about your total net assets, job and income, and credit history.

This information will ask for the following:

• Drivers Licence
• Social Security
• Telephone Number
• Address of Relatives
• Information on current mortgage company, monthly mortgage payment information, and landlord information
• Employment information, including position, salary, and position at work
• Tax returns and pay stubs
• Total assets and liabilities
• List of bank accounts and details
• List of investments
• Car details
• Estimated current residential home value
• Life insurance policy details
• Any liability and loan information

 

Items to Submit to US Mortgage Officer

In order to meet the lender’s requirement, you have to submit the following files:

1. Letters of references from the creditor (bank loan, credit union, mortgage loans)

2. A letter from your employer and possibly an employment contract

3. Personal financial information for the last 2 years

4. Canadian income tax returns for the last  2 years

5. Bank statements for the last 2 years

6. A letter of reference from at least 2 banks and must include your main bank

7. International credit report

8. Property appraisal report

 

 

Step 2 – Processing

After you put together the paperwork for your US mortgage application, a third party appraisal is required and title work will be ordered to appraise the value of the property and to verify current lien holders on the property.  Only after this is completed can your US mortgage officer secure mortgage interest rates for your for the product that you chose.

 

Step 3 – Underwriting

The underwriting department will receive your US mortgage loan application and they are the party that will approve your loan.  Once your loan is approved by the underwriting department to close, you will be notified to prepare closing documents.  Once the closing documents are prepared they will be sent to the location where the closing will take place.  The loan officer will also provide you a commitment letter, which you will have to accept at this time.

 

Step 4 – Closing

In the U.S., the standard practice is for the Canadian borrower to attend the closing .  This can be negotiated in advance and is something every Canadian should consider before they obtain a US mortgage.  The other options to close for US mortgage financing is either to complete this by post mail or by power of attorney (POA).

If you decide to attend the meeting, it will usually last about one hour.  It involves the buyer, seller, Realtor for the buyer, Realtor for the seller, mortgage lender representative, attorneys, if any, and the closing agent.

The purpose of the closing is to finally establish ownership of the real estate property that you are purchasing.  All documents are reviewed, signed, and ownership is then transferred.

The closing paperwork is extremely extensive and requires legal signatures of the borrowers.  It also contains all the details of the mortgage, mortgage options, terms, fees, and all other disclosure details.

If you are a Canadian and you are unable to attend your mortgage closing, the first thing you must do is notify your mortgage loan officer by verbally (and also in writing so you can have a copy).  You must also notify an attorney.  The attorney will work with the mortgage loan officer to establish a process to close the property and close the US mortgage on your real estate property.  Establishing this process can take time and can often result in extra fees.

The closing process involves the following:

• Closing agent to review the settlement sheet with both the buyer and the seller.  Any remaining questions are answered.
• The settlement sheet is signed by both parties.
• Loan documents need to be signed by the individual obtaining the loan.  All evidence provided to the lender will be on hand and you will need to indicate that all that information provided was truthful.
• You will need to pay for the closing costs and agreed upon funds due.  The lender will also provide a cheque for the loan amount.  both of these funds go to the closing agent to fund the purchase of the property.
• The closing agent will provide the mortgage information and title information to the government office to register it.
• After the mortgage and title is officially recorded, this is when funds are transferred by the closing agent and ownership of the property has now officially changed hands.

As a buyer, you will receive the following information from the closing process.  It is important you review these documents and keep them safe.

• HUD-1 Settlement Sheet.  The closing agent will provide a sheet to both the buyer and the seller.  This sheet will contain all information of the costs and services provided.  As a buyer, you should ask to receive this information in advance of the closing day, so you can know upfront the true costs of buying your property.

 

• TIL (truth-in-lending) statement.  This document is typically received three business days after applying for the loan.  This outlines the cost, APR, points, and other costs of the loan.

 

• Mortgage Promissory Note.   This is a legal document outlining what you owe the lender – a promise to pay document.  This outlines your responsibilities to pay the lender, on time, the amount, dates, and penalties if you do not.

 

• Affidavits.  This may be required to prove you are buying the home as a principal residence if you indicated so.

 

• Deed.  The seller will sign the deed at closing.  This indicates the transfer of property ownership from the seller to the buyer.

 

 

 

Tip: Speak to your real estate agent and also your mortgage loan officer in advance and ask them if they can help you work with an attorney that specializes in working with Canadians – they can also help you obtain and receive a discount on the fees.