How to apply for a U.S mortgage as a Canadian investor

Canadian investors have always found the U.S. real estate market appealing because of its variety, size, and lower property prices compared to back home. Reports show Canadians prefer buying in places like Florida and California. Florida attracts 22% of these investments, with California close behind at 15%, showing just how much Canadians like these areas for their potential to make money and grow investments.

The difference in property prices is huge. For example, buying property in Toronto or Vancouver can cost around $10,825.13 and $13,422.43 per square meter, but in U.S. cities like Miami, it's about $5,952.44 per square meter. This big price gap means Canadians can get more for their money in the U.S., making it a top choice for their investments.

Before you apply - Budgeting for a mortgage

Before embarking on the journey to purchase property in the U.S., understanding your buying power is crucial, and this is where obtaining a prequalification or preapproval letter becomes an indispensable first step for Canadian investors. A prequalification letter, especially one tailored for international investors like the online prequalification offered by Milo, gives a clear picture of how much you can afford, setting realistic expectations for your property search. Milo's platform simplifies this process, acknowledging the unique financial landscapes of international buyers and providing them with a streamlined, efficient way to gauge their investment capabilities in the U.S. real estate market.

When budgeting for a U.S. property, Canadian investors must account for several costs beyond the listing price. A significant consideration is the downpayment, with international investors typically expected to contribute 25-30% of the property's value upfront. This higher downpayment requirement reflects the additional risk lenders perceive with international investments. Other costs to keep in mind include closing costs, property taxes, insurance, and possibly homeowner association (HOA) fees, all of which can affect the overall affordability of the investment. Planning for these expenses from the outset will provide a clearer understanding of the financial commitment involved in purchasing U.S. real estate.

Finding a property

Choosing the right location and property type in the U.S. is pivotal for Canadian investors, with decisions guided by investment goals and budget. Data reveals a clear preference among Canadians for single-family homes and condos, reflecting a strategy that balances rental income potential with the ease of management. Single-family homes, in particular, are favored for their appreciation potential and appeal in the rental market, while condos offer a lower-maintenance investment, often in prime urban locations. According to the National Association of Realtors (NAR), these property types consistently attract international buyers, with Canadians leading the charge.

When it comes to loan eligibility for international clients, the property's intended use—be it as a primary residence, second home, or investment property—plays a critical role. For Canadian investors, investment properties are generally the focus, necessitating a higher down payment but also opening doors to specialized loan products designed for foreign nationals. Securing a purchase agreement is a crucial step before applying for a mortgage, serving as a tangible commitment to the property that lenders require to proceed with the loan application. This document not only confirms the investment intent but also aids in the financial assessment, ensuring a smoother application process with lenders like Milo, which caters specifically to international clientele.

Overview of the U.S mortgage process with Milo

The mortgage application process, especially through platforms like Milo designed for international investors, is streamlined into several distinct stages, offering a clear path from initial interest to closing. Here’s a brief overview:

• Account creation: This initial step involves providing basic demographic and contact information, crucial for receiving updates and managing your application.

• Getting an offer: Taking less than 5 minutes, this stage gives a quick overview of potential loan terms based on preliminary information.

• Complete application: Here, additional detailed information is required to refine the loan offer.

• Secure your offer: Involves paying for the property appraisal, a key step in confirming the property's value and the loan amount.

• Validate your Information: Document validation to verify the information provided during the application.

• Schedule closing: The final step where closing dates are set, leading to the finalization of the mortgage.

The initial mortgage application stage is pivotal for international investors using Milo. It focuses on gathering vital financial details, such as "annual income and total liquid assets," to determine the best loan program. Full transparency in this phase is essential for tailoring loan options that align with the investor's financial situation and property goals.

Stage 1 - Initial Mortgage Applications Questions Explained

• Property Address: Essential for assessing the property's location, which influences loan terms due to varying real estate market conditions and property values.

• Property Type: Distinguishing between investment properties and others is vital as Milo specializes in loans for investment properties, which have different risk profiles and loan requirements.

• Type of Home: Whether it’s a single-family home, condo, or multi-unit property, this affects eligibility and loan terms, reflecting different levels of investment risk and potential returns.

• Purchase Price: Sets the baseline for loan amount calculations and influences the down payment requirement.

• Target Down Payment: Indicates the borrower's financial commitment and affects loan-to-value ratio, a key factor in determining loan eligibility and terms. A minimum of 25-30% is recommended for foreign nationals to align with Milo’s lending criteria.

• Target Closing Date: Helps align the loan processing timeline with the buyer's and seller's expectations.

• Initial Escrow Deposit: Shows earnest money committed, demonstrating the buyer's seriousness and can impact how total liquid assets are evaluated and is deducted from total loan costs within the loan summary.

• Expected Monthly Rental Income: Provides insight into the property’s income-generating potential, important for investment property loans.

• HOA Fees: Helps in understanding the ongoing costs associated with the property, affecting affordability and investment viability.

• Application Type: Applying solo or with a co-borrower can influence loan approval chances and terms.

• Property Ownership: Number of properties owned can impact lender’s confidence in the borrower's investment experience and financial stability.

• Income Source for Payments: Essential for assessing the borrower's ability to meet monthly payments and will help evaluate whether the client can rely on personal income or income generated from the property to cover the loan.

• Repayment Plan: Gives lenders insight into the borrower’s exit strategy, which is crucial for assessing loan risk.

• Passport + Immigration Status: Ensures the borrower can legally enter and leave the U.S. freely, a prerequisite for loan approval.

• FICO Score: While not mandatory for eligibility, a U.S. credit history can positively impact loan terms.

• Annual Income and Total Liquid Assets: Critical for assessing the borrower's financial health and ability to cover down payments and subsequent loan payments.

Each of these questions is designed to gather comprehensive data about both the borrower and the property, ensuring that Milo can offer the most accurate and beneficial loan terms tailored to the specific needs and circumstances of international investors.

Once the initial mortgage application is complete, the Milo online portal efficiently guides clients to the next crucial steps. It presents an overview of the most suitable loan programs, carefully aligned with the client's financial situation and investment objectives. Clients have the opportunity to review the terms and interest rates of each option, allowing them to make an informed decision on which program best fits their needs. Upon selection, a detailed loan summary is generated, providing clear insights into the chosen program.

Following this, clients are paired with a personal loan consultant from Milo. This expert will accompany them through the remaining stages of the process, from document verification to the final closing. This personalized guidance ensures that clients fully understand each requirement and timeline, making the journey from application to ownership as smooth and straightforward as possible.

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Milo's online portal simplifies the U.S. mortgage process for Canadian investors, offering a streamlined application tailored for international needs. With Milo, you're guided through every step, ensuring you find a loan program that matches your financial profile and investment goals. Consider Milo for your U.S. real estate ventures and start your application today for a seamless investment experience.

The opinions expressed in the Blog are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security or investment product.