How Canadians Can Get a US Mortgage: Lending Options for Cross-Border Real Estate Investing

Introduction

Welcome to the Wisdom Lifestyle Money Show. I'm your host, Scott Dillingham. The show is designed to help Canadians invest better in Canada and the United States. We are the North America-based mortgage financing lender and provide education to both countries.

Discover how you can become a better investor and access the financing you need. Welcome to the Wisdom Lifestyle Money Show.

I'm your host, Scott Dillingham. Today, I'm doing a live stream and I'm gonna show you guys the US lending. So for those that don't know, we are a lender in Canada, but we can also lend to Canadians or any other foreign buyer of pretty much any country globally in the United States.

So I made this presentation. It is geared towards Canadians, but again, we can lend to any foreign buyer who is interested in purchasing investment properties in the States. Okay, so we'll get this going. So the beauty of what we have here is we are a one-stop shop.

The Core Idea

We do residential and commercial lending in Canada and the States. Okay, so we've got you covered there. The beauty of that, I'll get into further, but just know that this is very important.

Benefits, right? So we can lower the fees of your lending if we're working with you in both countries. It's much easier to access equity. So with one application, we can work with the different lenders.

We act as your guide too. And in our whole team, we are investors. So that's the beauty of this too, is that we understand what you're trying to do. Okay, now I'm gonna show you a couple of deals that came across our desk just to show you the vast amount of different lending options we have.

65 million purchase of an office space in Ohio. Okay, so I have the email here from the lender. So now this particular property, and I wanna be honest, commercial is tighter.

Deep Dive

It's harder than residential. 25 million to the client to purchase this with a 7% interest rate, which is very good actually, and a 25-year amortization. And that's without a US partner.

So I think that's very important. There's a lot of commercial investors that I speak to that wanna go in the States think that you need a US partner. Obviously having a US partner is gonna sweeten the deal, right? You're gonna get a higher loan to value with a potentially lower rate.

But not everybody has a US partner. So my recommendation is just get the lending now if you have the capacity to do so. And then as you have that experience, the lenders are willing to lend you more over there. So then we can always refinance and redo the original mortgage in the first place.

So again, you buy, take a little bit of a beating, right? Because the loan value is quite low, but you get the property.

Practical Steps

Now you've got the experience. You're in the market. So when you buy a property too, you're gonna have much better terms. So again, once that deal completes, then we can go back and redo the first mortgage.

So that's kind of the strategy there for a lot of a commercial. But we do everything, right?

So this is an eight unit. So it's actually two fourplex properties side by side. We are working on this now. Now I wanna show you some of the rates.

It's actually a bit outdated too. 2% over a 30 year term.

Key Takeaways

Okay. And then the third column on the right is showing the buy down amount. So in the States, you can buy down your interest rate. And we actually have a strategy where we can have the seller do this for you.

So you're not paying out of pocket. 25 at the time.

375. So we've added a ton of different lenders and we shop around for all of our clients. So the US lender, and again, guys, these are US lenders I'm speaking of here.

375 for the same deal. So obviously that's awesome for the clients. But even when, you know, we're doing single family property.

Resources

So we're doing a condo in Florida. You can tell it's Florida from the palm trees.

Okay. Now this was an Airbnb one.

25. 25. And it needed 9,000 to buy down. And again, I'm going to touch on that shortly, the buy down.

It's very important to know. So financing in the States is, easy. A lot of Canadians think it's hard. Those that speak to their banks, it's still just as hard as applying in Canada.

Introduction

The challenge with the banks financing is that is meant for your cottage, your second property, right? They want these things in the personal name. They look at your Canadian debt to income ratios to qualify you. So if that's the product you're looking for and you want to buy, please go to your bank because you're going to get much better options.

But the thing is the banks, they don't let you currently set up in the entities from the lenders that we've spoken to. And the other challenge is they don't want rental properties. So our product is specifically geared towards real estate investors. Okay, so here's how easy it is.

S. visa, which a lot of people think you do.

S. partner.

The Core Idea

You can do this alone. We don't need to show Canadian income or even American income for that matter.

It's based on the property. Now, I will say this. We do have some lenders that if we can prove your income, then potentially you can get lower interest rates. But if you don't want to prove it and it's just based on the cash flow of the property, no problem at all.

So again, that goes to point number four. So it's 100% based on the income of the property and you can purchase unlimited rental properties. Okay, so there's a few things that you must know.

So your term is your amortization. So in Canada, when you pick a five-year term, it renews and then you renew into another term. In the States, they don't do that.

Deep Dive

So your amortization is a term. So generally speaking, investors are getting a 30-year term or a 40-year term, which is available over there, which is nice because you get stronger cash flow with a 40-year.

Okay. You can also specify when your mortgage is open or closed. So by default from all the lenders, you're usually open between three to five years. Most of them that we have access to, you're open after five.

And that's by default. So that means you keep your mortgage with this lender for five years. And then anytime after that, you can break the mortgage and there's no penalty.

Okay, so that's really cool. But you can specify right away how quickly you want your mortgage to be open. So the five-year being open after five years is going to give you the very best rates. But you can choose an open after four, open after three, two, one, or open from day one.

Practical Steps

So if it's a property, you know you're going to renovate and turn it over. And then you want to refinance it. You're going to want to go open right from day one. So that is absolutely an option for any property.

Okay, so the lenders use a debt coverage ratio to qualify. So we input the property's rental income, the purchase price, the mortgage amount with the mortgage payment. And then we subtract hazard insurance. So home insurance, but over there they call it hazard insurance.

Now, if the property has an HOA fee, meaning homeowners association fee, kind of like a condo fee over here, we subtract that as well. And then we get what's called your debt coverage ratio. So if the debt coverage ratio was one, that means all the property's income covers all the property's expenses. We can move forward with that.

In fact, we can even move forward with negative DCRs. I don't encourage that for an investor. I think you want to buy with cash flow in mind. And in the States, you can, right?

Key Takeaways

I know in Canada, you can too. And I love Canada.

I still invest here. But this is just additional options for you.

Okay. So here's some residential options.

375. Okay. 5 to nine, again, that is the regular retail pricing. The reason it would go to nine is if say you wanted to fully open and you were buying, let's say in New York, because New York, there's a bit of a premium on the rate with most of the lenders.

Resources

So that would cost you more. But then those figures are with no buy down.

Okay. So I haven't even touched on that yet. And I will touch on that shortly. Again, on how the seller can pay to get you a lower raise.

The minimum mortgage amount is 75,000. So this is a bit tough for local people. I know I'm local investors because we live in Windsor and Detroit's right across, right?

So we're a border city. So in Detroit, you can find homes that are much less than this. But the thing is, that's the lender's minimum lending. So really, you've got to be buying something around 110 or higher to be able to tap into this type of lending.

Introduction

Down payments start between 25 to 30% of the purchase price. You can buy one to eight units under this program. I will be making another episode within the next week, touching more on the commercial. Actually, I'm going to do multiple episodes about commercial because there's different commercial classes like multifamily and office and industrial.

So I'm actually going to have an episode on each one diving into these things so you can learn. The total fees, which is also commission, ranges from 2% to 3%. Okay, that's very standard and very common for this lending that's all the narrow. Okay, so again, with a term, you can do 30 years principal and interest or you can select interest only.

Same thing with the 40 year. Okay, again, I touched on, but by default, it's open after five years. And again, you can make it open right away or a one, two, three, four years.

Variables are available. The variable is a bit different. So in Canada, right, you choose variable and right from day one, it adjusts. In the States, though, you get a lock in period where it doesn't change for that period.

The Core Idea

And then generally speaking, every six months, they'll review the market and adjust your rate accordingly after that lock in period. So it's a bit different, but it's still a great product and it is available.

Okay, so for rates. So here's how to get the very, very best rates.

25%. If it's under, you can still get an attractive rate, but there's going to be a bit of a premium. Again, down payments start at 25, but generally speaking, if you're doing 40 or more, you will get better rates. We have actually a few lenders that at 30, it's the same like 30% down.

They're giving you the same rate as if you had 40% down. So we've got a couple of those lenders. So the stronger the credit in the States, the better the rate. Now, the reason for that is Canadians, you don't have to have a credit or any foreign buyer for that matter.

Deep Dive

They're going to price you as if your credit score is 680. Okay. So what happens is if you build a US credit, they will use that score instead. And again, that can help you to get better rates.

Lending amounts of 150 or greater also equals better rates. And your location can affect rates like I touched on with New York, right? New York's higher in price than say Texas, right? They have a bit of a premium.

So it is what it is. So mortgage size, again, some of this I touched on, but the minimum lending amount is 75,000. The minimum at a lot of lenders is 100,000.

Okay. So keep that in mind. So if you do buy and you're trying to get something as low as 75, I put on here with one lender, we've actually onboarded with more lenders since I made this presentation. It's maybe about two to three weeks old.

Practical Steps

That's why the rate on the on the eight unit dropped as well because things have come down a bit. But so now we have three lenders that can go a minimum of 75, but you're not accessing all of the lenders, right? So there's less likelihood that we can shop around for you. So there's fewer lenders, but at 100,000 or above, that's kind of the minimum of all lenders.

So then we can really shop around for you and the rate tiers. So at 100,000, here's your rate, 125, here's your rate and you get at above 150. Here's your rate and it gets lower again, the higher the mortgage amount is. Now, the lenders, they do avoid properties with deferred maintenance.

So that is the catch to this program, right? You're from Canada or any other country, right? You could be from Japan and want to want to tap into this type of lending and it's available for you. But if you're from a foreign country, they're not very keen on deferred maintenance properties because how can you fix that?

How can you see that it has the deferred maintenance when you live so far away? Now, obviously, some people are going to be like, oh, I have a property manager, but we all know that not all property managers are created equal, right? So lenders are just very, this is a risk to them. Now, we do have flipping products where they don't care about that.

Key Takeaways

So generally speaking, the lenders I'm speaking about right now are more of the buy and hold lenders, okay? So the buy and hold lenders don't like the deferred maintenance.

Flipping lenders love it. That's what they're in the business for. So if you want to buy a property that needs this type of effort and work into it, then what we'll do is we'll use the flipping lender as lender one, get you all set up and then we'll convert you to a buy and hold much like we would in Canada too because the major banks, they don't like properties with a lot of deferred maintenance in Canada either.

Okay? And then again, blanket mortgages are available so we can do complete portfolio loans, which is pretty cool. And a portfolio loan for those that are unaware is you can literally buy a group of 30 properties. So here's the purchase price, 30 properties, let's go, right?

We can do that in the States. So down payments, again, minimum is 25 down, 30 to get the best rates. 90% of the lenders want the 30% down. So I would, I would set that as your target.

Resources

You must prove 60 day history of funds. In Canada, it's 90 days.

Okay? So the fact that it's 60 days over there is a little bit easier, but they have to be held in a US account 30 days prior to closing. So keep that in mind because you don't want to get yourself in trouble.

Okay, now for units. So most of the lenders are only doing one to four. There's only a handful that we have that'll go up to eight. Actually, we just onboarded with one today who will go up to nine.

So we're, we're getting the details about that before we start promoting it. But there's, again, most lenders want one to four units. Okay, so broker comp slash fees. Okay, so you're going to pay two to 3%, which is the average commission in the States for this type of product.

Introduction

Okay, now some of the lenders that we have, we can add these fees to the lending amount. So you're not necessarily paying them out of pocket. Okay, now some lenders have no fee at all. So you have to be careful as an investor because I've priced these for our clients and it's not good.

So, so if you're going to accept a higher rate with no fee, you end up, the break evens probably a year, maybe a year and a half. And then after that, you're overpaying year over year over year over year because you've accepted a much higher interest rate, which is generally one to 2% higher. So it's always better in every scenario that I've ever run to pay the fee up front to get the very best rate that you can right out of the gate. Okay, and then you want to get the seller to pay the fee.

So again, I'm going to touch on that in just a second here. So how can you get the seller to pay the fee and to buy down your raise? Okay, so in the States, we can do what's called a seller credit. In Canada, technically, you can do it, but what happens is in Canada, the lenders rebate the purchase price.

So let's say you bought a home for $300,000 and you had a $20,000 seller credit. In Canada, the lenders will say, okay, well, your purchase price is only $280,000 then. And so they'll finance $280,000, right? So if you're doing 5% down or 20% down, it's based on that $280,000.

The Core Idea

Where in the States, you can actually increase the purchase price and have the seller give you credits. So literally, you can finance the fees if you want. But then those seller credits that I was telling you about where you can pay cash to lower your mortgage rate that can come from the seller. So it's like cash on closing from the seller.

So it's super cool. I encourage everybody who's making a purchase over there to ask for a seller credit and I've run the numbers for every one of our clients. It is always better to have a seller credit cash on closing, right? And lower your mortgage rate than it is to take that same dollar amount from the seller and lower the purchase price.

So let's stick to that $300,000 purchase price for the $20,000 credit. Okay, let's just say if you're going to take $20,000 off the purchase price, you might save $20 to $30 a month on your payment. 5% because of the seller credit, you're saving $100,000, maybe $150 a month on the payment.

So it's a much bigger difference. But then you're also saving thousands of dollars of interest over the life of the mortgage.

Deep Dive

So it's just a way better option. So if the seller is not willing to give you a lower purchase price and a seller credit, then get a seller credit. And if they say no, because there's so much competition, they're not selling it below a certain price, then offer them a higher purchase price with the seller credit. Okay, so again, it can be used to buy down rates.

It can go towards the bucket for the fees and closing costs, that type of thing. And again, I touched on it, but seller credit is better than the lower purchase price. Okay, so here is the process. So I am not an accountant and I recommend that you speak to one, but from my clients, they have told me that it is better for them to set up an entity in the States to purchase.

Most of the lenders want you to buy in an entity. We do have some that we can close in the personal lane.

So we can do both. Okay, what I'm being told there's no double taxation and there's other benefits, right? There's liability protection and different things like that.

Practical Steps

But again, not my specialty. I do the lending, speak to your accountant, see what's best for you. But generally speaking, that's step one is determining the structure. And by the way, I can introduce you to all of our connections.

The link to contact me is going to be in the show notes of this show where you can book a strategy call with my team. We will share all of our contacts with you to help make this journey a success for you. Okay, now after the entities the bank account, right? Because you need to show the money in a bank account before closing.

You also need a spot where you can collect the rents. Okay, so you got to get the bank account.

Generally! to get the entity and set up a bank account in the States in your personal name.

Key Takeaways

Both are possible. I'm just saying again from what I've been told from the bankers and I've went through this whole process myself setting up the entity setting up the US bank account and I could tell you it's pretty seamless having the entity set up. Okay, and then there's either the done for you path or there's the do-it-yourself path. So we work with the group called Share and Share they hold your hand.

They can actually help you set up the entity, work with you on getting the bank accounts. They even find the properties, install property management for you, fully renovate them.

So it's like a turnkey solution. Okay, I will introduce you to all of my contacts there if you want to chat with them and see if it makes the most sense for you to do that. Okay, now they do specifically focus on single family properties. Their pitch is five to seven caps.

That's what I see them advertise. And it is available. Now they will work with you if you have a specific location or something that you really like. They will try to organize that for you and find some type of off-market deal and orchestrate that for you.

Resources

So really great contacts. But then there's also the do-it-yourself method. Now the do-it-yourself method, I can still, same with my team, refer you to professionals, realtors, things like that that we know. But that's up to you, right?

You'd have to interview them, see what makes the most sense, who you want to work with if there's a connection, and if there is, and obviously move forward at that point. And then lastly, once you find the property, you review the terms, we fill out any forms and supply any documents the lenders need, and then we close.

Okay, so I am oversimplifying. There is multiple steps within each one of these steps, but it's not hard either. It's just, it's probably cumbersome the very first time, because there's going to be terminology in things that you've never heard of.

Everything's different over there. Like the one lender today, they asked for an LOE for the customer. In Canada, that means letter of employment. Over there, it was letter of explanation.

Introduction

So they wanted the investor to explain how they were moving out of their current home and how they're renting it out, because this program is specifically for investors. So we're going to get that. But so anyways, there can be confusion, right? Because they're using a lot of the acronyms that we use.

But over here, they need different things than over there. So again, we can act as your guide. We'll help you through all of that. Okay, so here are some of the new products.

So we've got fix and flips for foreign buyers. So that was something we really struggled with when we first started in the States. Most lenders do not want to work with foreign buyers, but we got them. Okay, we have lines of credit for experienced flippers.

So super cool product where you can get a line of credit that is worth up to three to four times your project's value. So then you can do multiple flips at a time.

The Core Idea

So super cool. Obviously, there's terms and conditions. So if that's a product you're interested in, again, we'll strategy call with someone on my team. We'll offer you a free strategy call.

Commercial flips. We have lenders where we can flip up to eight units and just, yeah, it's in credit, right? It's not just single family homes. Now we're adding more lenders weekly.

It almost feels like daily because we're just adding so much. And the reason we're adding so many different lenders is we just want to have the most diverse, best priced product for any foreign buyer that wants to buy in the States.

That is specifically our niche. And what we found is investors that go to a broker in the States, that broker will have a product or two for the Canadian or any other foreigner to move forward.

Deep Dive

But they're in America. They're used to working with Americans. So for us, we're used to work with foreign buyers because this is where we're. So I find our lender pool is very, very diverse.

compared to a broker that's boots on the ground in the States. S. broker has the edge above us because we were not getting into the homeowner space over there. We're not just we're doing investors only.

So keep that in mind as you shop around. The hottest markets are Ohio, Florida, in Texas from our clients that have purchased. There's so many others like today. We're literally submitting a deal today in Tennessee, right?

So we we have clients that buy everywhere. But that if I was to add all the properties up that everyone's buying, those are the three hotspots. Again, you want to speak to a realtor, get market fundamentals, just like anything that you would do over here. Okay, so you literally take everything that I'm saying with a grain of salt and research everything for yourself to make sure you're making the most educated decision.

Practical Steps

Okay. So I think that that is it.

So that is the end of the presentation. So if you're interested in investing in the States and you're looking for more options, just know there are options out there. It's very easy to get started.

It's really not complicated. We're more than willing to help.

So we have two things. Obviously in the show notes, again, I already mentioned it, but you can book a strategy call with my team and then we can answer any questions that you have related to this. But also there's a link to the investors hub. I recommend everybody just join that.

Key Takeaways

We have all these different webinars where we're covering this. In fact, at the time of this recording, it's close to the end of May, early June. We have a lady there who helps Canadians set up visas so they can actually have a visa and live in the States through real estate investing. So we're just doing all kinds of really cool things.

The hub is free, guys. Just join it. You can access all these events. You can find off market properties.

If you're a realtor, you can post your properties in there as well. We do filter them to a point. We want to make sure there's not just junk. So, you know, as an investor, just know that they are being filtered, which is awesome.

But we have a Canadian real estate investing course. The US one is going to be launching very, very shortly. It's a really cool place to hang out. So anyways, I hope you enjoyed today's show and I look forward to chatting with you guys shortly.

Resources

Thank you so much for tuning into the show today. If you found value, please follow the show and rate it five stars. It would mean the world to me. And lastly, all the resources that we spoke about are at the bottom of the show notes.

Looking forward to seeing you in the next episode.