Moving to the U.S. for more affordable Real Estate

Moving to the U.S. for more affordable Real Estate? Home prices have run-up in the U.S. but are mostly more affordable than major Canadian markets.

Like many real estate markets worldwide, U.S. home prices have run up during the pandemic to the point of some saying it’s in bubble territory. But the whole time and for years before, Canada has said: “hold my beer” as prices rocket through the stratosphere in several major markets. The discrepancy jumps off the page in comparisons of the most recent benchmark prices and household income.

The situation has gotten so bad for first-time buyers that many may have given up. Ontario is home to markets with the most significant recent run-ups. A survey by Right at Home Realty found 74 percent of younger Ontarians aged 18 to 34 say they may never be able to afford a home where they currently live.

But not so fast if you’re like any of these people and thinking of moving across the border. There are some things to consider.

Immigration rules for moving from Canada to the U.S.

The first thing to consider is immigration laws. If you work from home, you can’t just grab your laptop and start working from the U.S.
You need a U.S. employer to sponsor you and be qualified for a TN or L-1 visa.

If a Canadian employer has a U.S. entity, this could potentially be another option. However, it depends on the visa category.

It’s the same deal if you plan to work for a U.S. employer. Canadians can present TN and L-1 visa petitions at the border (now by air is recommended versus land).

In other visa categories, the employer would need to file the visa petition with the United States Citizenship and Immigration Services (USCIS) and obtain approval first.

It’s essential to have all of the correct paperwork when entering the U.S. to avoid being turned away. Ensure they have original documents when appearing at the border: approval notice, as applicable, educational documents, birth or marriage certificates.

Mortgage rules for buying a home in the U.S.

Unless you’re lucky enough to be able to buy a home outright, you’ll need a mortgage, and things are primarily similar to obtaining a mortgage in Canada if you’re moving to the U.S. permanently, but with some key differences.

One of them is proof of income. It may be harder to prove income to the U.S. lender’s satisfaction if you have already moved to the U.S. before applying for a mortgage. That’s because most mainstream U.S. lenders generally want to see at least two years of U.S. tax returns. If this is the case, find a good broker in the U.S. to advise you.

If you plan to buy before having your immigration and job situation sorted out, most lenders will want 20-25 percent down instead of the 5 percent minimum in Canada.

If a Canadian has the equity, provable income, good credit and reasonable debt ratios, it’s no harder to get approved in the U.S. It’s a LOT more paperwork, however.

There are lots of fees on a U.S. mortgage that you’d never see on a Canadian mortgage, including upfront costs like application fees, loan origination fees, as well as back-end costs like stamp taxes (which even apply to refinances) and so on, depending on the state.

U.S. lenders commonly quote points with their rates. Points are upfront cash you pay at closing to buy the rate down. Canadian lenders don’t use points.

Amortization periods are also different. The U.S. has 15 and 30 years versus five years in Canada. The most common term in Canada is the 5-year fixed, which you can find for 2.14% or less (uninsured), whereas in the U.S. is the 30-year fixed, which you can find for about 2.94% less.

If you already deal with a Canadian bank with operations in the U.S., that can make the process smoother.

Often, if you’re their customer, they can approve you based on your Canadian credit history, with fewer documents. That makes the process a little easier. You might also get a slightly better rate.

Overall, things take longer in the U.S., and there’s more red tape.

Another option could be using your HELOC.

Tax implications for Canadians moving to the U.S.

You’ll also need to get up to speed on how taxes work. If you move to the U.S. permanently, you’ll pay what any other resident pays. But things could get complicated as you try to leave Canada.

Be mindful of the potential for a departure tax when exiting Canada. Depending on the assets you possess at the time of departure, you will have to declare “sales” of those assets on your last tax return, even if you haven’t sold those assets, such as shares in stocks in a non-registered brokerage account.

It could mean that you will owe tax on the money you haven’t received.
But there is a workaround: defer these deemed dispositions by electing through the appropriate form and including it with your last tax return; however, when you actually sell the asset or come back to Canada, whichever is first, you will owe Canadian income tax on those assets at that time.

When it’s time to buy a home in the U.S.

Canadians have always been seen as great cash buyers, but competition is heating up locally and from international buyers.

In today’s market, Canadians are also competing against non-cash buyers who may be contingent on financing. Still, they’re coming in with a higher price (generally about $20,000+ over list price, depending on the property). They are waiving their appraisal contingencies— which has been very enticing to sellers and often wins the deal even over a cash buyer.

Many Canadians are used to bidding wars, and they are a reality in the U.S. as well. So, if you find a property you like, you should put in the highest bid you can and not regret losing out.

Many sellers accept bids from buyers who’ve seen the property in person over those who haven’t because the majority of properties listed enter into a bidding war. A seller wants to ensure that the buyer has seen it instead of solely trying to ‘hold’ the property by getting it under contract and then using the inspection period to see it and decide if they like it and want it.

In that case, sellers can lose out on buyers who were more serious about purchasing the property. With that said, you can do things if you are unable to physically view the property to make yourself more appealing to sellers.

It’s essential to have dedicated time to spend here to look at the property and work with an experienced agent who will FaceTime you the property and explain appropriately to a listing agent as to why you physically aren’t present.

When you work with someone experienced and connected, they can vouch for you as a serious and qualified buyer. That’s a lot to take in, but hopefully helpful to any Canadian buyer thinking about making a move to the U.S. in search of a more affordable place to call home.

Source: Yahoo! Finance

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