There was a time when Canadians could secure financing in the United States as easily as they could in Canada – this time has now passed. As a result of the subprime “crisis”, US Lenders are cracking down on foreign borrowers, and bargain shoppers are now being encouraged to bring cash with them for their purchases rather than obtaining financing.
While some consumers are still able to secure financing, the process has become extremely difficult and lenders are demanding a strenuous amount of documentation, more so than previously required. In addition, the application times are long and strenuous, and the down payment amounts lenders are requiring have increased.
Foreign buyers, for example, should be prepared to provide detailed financial records including two years of tax returns, and down payments will likely be required to have been deposited in a US bank account for at least 30 days, and these down payments are now, more often than not, in excess of 45%.
When getting a mortgage in the Unites States, Canadians are required to deal with a “qualified lender, including a bank headquartered there or the U.S. Subsidiary of a Canadian Bank” and these lender options for Canadians are rapidly shrinking. Lenders are tightening up due to previously lenient qualification standards and falling home values, which combined, have been perceived as the two major catalysts for the sub-prime “crisis”.
Previously lenders were providing financing for individuals with short job tenure, unstable credit, and Business-For-Self Individuals who were able to “state” their income under specific products, and as a result, mortgage defaults hit an all-time high (in the US) and lenders began to close their doors. As a result, there has been a general crackdown on loan requirements for both foreign and domestic borrowers so caution yourself when purchasing foreign real estate.
There are still many great deals to be had with US Investments in Real Estate, but ensure you speak to a Mortgage and Real Estate Professional before you place a deposit on a property to see what type of financing you can arrange.
MBN Mortgage
Globe and Mail
September 8, 2008
