Many Canadians are drawn to the idea of owning real estate in the U.S. – whether it’s a vacation home in Florida, an investment property in Arizona, or a retirement home in California. The U.S. real estate market offers a wealth of opportunities, but the process of buying property across the border is often clouded by misconceptions and myths that can discourage potential buyers.
Myth 1: You Need a U.S. Credit History to Buy Property
Reality: One of the most common myths is that you must have a U.S. credit history to secure financing for a U.S. property purchase. While some U.S. lenders do require a credit history from within the country, this is not always the case. For instance, many US lenders and some Canadian lenders like RBC’s cross-border mortgage services (through it's RBC U.S. subsidiary) allow Canadian buyers to qualify for U.S. mortgages using their Canadian credit history. Thus, several lenders that work in alliance with our team understand the unique needs of cross-border buyers and offer financing solutions that don’t require a U.S. credit score. This makes it easier for Canadians to enter the U.S. real estate market, taking advantage of competitive mortgage rates without the need to build a U.S. credit history.
Myth 2: Getting a U.S. Mortgage Is Complicated
Reality: Another common concern is that securing a U.S. mortgage will be a complex and difficult process, possibly requiring a trip to the U.S. to complete the application. In fact, the mortgage process doesn’t need to be complicated.
These lenders simplify the process with cross-border mortgage services that provide all the support you need to navigate both the mortgage and home-buying procedures. Some of them even offer mail-away mortgage applications, so you can handle everything from Canada without the need to travel to the U.S.
Myth 3: The Buying Process in the U.S. is the Same as in Canada
Reality: While there are some similarities, the process of purchasing property in the U.S. differs in several key ways. For example, mortgage processing times are longer in the U.S. – typically 40 to 45 days, compared to the 5 to 10 days in Canada.
A significant difference is the role of escrow in U.S. transactions. In Canada, lawyers typically handle the transfer of funds and property, but in the U.S., an escrow agent—a neutral third party—holds the funds during the transaction and ensures all sale conditions are met before releasing payment to the seller.
Additionally, the required down payment varies. In Canada, 20% is standard for conventional mortgages without insurance, and 5% is needed with mortgage insurance. In the U.S., 20% is typical for primary residences, and 25% - 30% is common for investment properties.
Closing costs also differ. In Canada, they are generally around 2.5% of the purchase price, covering land transfer taxes and legal fees, while in the U.S., closing costs vary and may include additional fees by the bank. RBC U.S., however, doesn’t charge these extra fees on U.S. mortgages, which can save Canadian buyers money.
Myth 4: Foreign Buyers Face Higher Property Taxes
Reality: Property taxes in the U.S. are based on the property’s assessed value, and rates vary by state, county, and municipality. Contrary to what some believe, foreign buyers, including Canadians, do not pay higher property taxes than U.S. citizens. The tax rate is the same for all property owners, regardless of nationality.
The Canada-U.S. Tax Treaty also allows Canadians to claim a foreign tax credit on their Canadian tax return for property taxes paid in the U.S.
However, it’s important to be aware of local property tax rates, as they can differ significantly from one location to another. For example, Texas typically has higher property taxes than Florida. Additionally, some U.S. states offer tax exemptions for primary residences, which may not apply to foreign buyers.
Canadians should also be mindful of lender fees that some U.S. banks charge foreign buyers. A "foreign national premium," which ranges from 1.5% to 2% of the loan amount, is common, though not all lenders charge it. RBC U.S., for example, does not impose this fee and also waives other standard lender fees like underwriting and processing fees, offering Canadians significant savings.
Myth 5: Renting Out Your U.S. Property Is Complicated and Risky
Reality: While renting out a U.S. property does come with some responsibilities, many Canadian investors successfully rent out their properties, especially in high-demand tourist areas, generating a steady income.
The key to successful property management is understanding local rental markets and regulations. For example, short-term vacation rentals may be subject to zoning laws or restrictions in places like Miami or Los Angeles. Working with an International Real Estate Advisor to guide you and with a local property management company can alleviate much of the burden, ensuring compliance with local laws and providing peace of mind. Property managers can handle tasks like tenant screening, maintenance, and rent collection, which reduces risks and makes the rental process easier.
Getting the Right Support
The U.S. real estate market offers exciting opportunities for Canadian investors, but separating myths from facts is essential for making informed decisions. With the right knowledge, resources, and support, Canadians can successfully purchase property in the U.S.
Our allied lenders provide flexible mortgage options, financing for properties in all 50 states, and the ability to use a Canadian credit history for mortgage qualification. Additionally, RBC U.S. doesn’t charge the foreign national premium that other U.S. lenders might, and their pre-approval process helps you act quickly when the right property comes along.
Our team offers a comprehensive suite of tools and resources to guide Canadian buyers through the process. This includes access to our partner U.S. real estate agents who specialize in helping Canadians find the right properties, as well as tax and legal advisors. A free U.S. home-buying e-guide is also available to further assist you. Please register your name and email adress in my website and write U.S. free home-buying guide so that we can e-mail it to you.
With the right support, Canadian investors can confidently explore the U.S. real estate market and seize the opportunities it offers.