With the warm weather, similar culture and rather close proximity to Canada, Florida has become a favourite destination for many Canadians. You may be wondering; What do you need to buy a house in Florida? This guide is meant to answer questions you may have, while helping you navigate the process of buying a house in Florida.
Before even starting to think about where in Florida you would like to purchase or what type of property you want, it’s important to determine how you will fund your purchase. Especially considering it will be harder to obtain a mortgage for another property not in your own country, having a large down payment over 20% will be important. As well, building your US credit score will be helpful in obtaining a loan, and can be done by applying for and using a US credit credit or line of credit when you visit. Once you have some form of credit in the US, keep paying your monthly bills off in a timely manner and in full to help improve your US credit score.
When searching out sources of financing, some Canadian banks such as TD & RBC may offer a US mortgage to Canadians. If you already bank with RBC or TD in Canada, it will make the process of getting an RBC US mortgage or a TD US mortgage that much easier. This is because these banks may be able to leverage your Canadian credit history in order to help you get qualified for a mortgage loan with them in the US.
If you are unable to qualify for a loan however, you may need to purchase upfront with cash. In order to get the funds needed to purchase a property outright, you could:
Overall, it’s likely that purchasing a property without a loan is unfeasible for many people. This is why having the funds ready to purchase and understanding where your money will come from in advance is crucial to getting the process started.
Being a foreigner in the US may mean there are different factors to consider versus buying a house domestically in Canada. Two of these factors are:
|Factors||How Will it Affect You?|
|Currency Exchange||It may impact the amount of money in Canadian dollars you owe, when the exchange rate fluctuates in either direction.|
|Snowbird Regulations||The maximum amount of time a Canadian resident without US citizenship or a green card can stay in the US is 6 Months. This will affect the amount of time you will be able to use your property.|
When determining how much you are able to afford, it is important to consider the closing costs of the property. In Florida, the average closing cost with taxes will come out to ~ 2.3% of the purchase price. These closing costs can include:
|Fee Name||What is it?||Estimated Cost|
|Appraisal Fee||Required by the lender to determine the value of the property.||~$350|
|Home Inspection Fee||To determine if the property meets standards.||$350 - $600|
|Title Search Fee||To ensure no issues with ownership prior to purchase.||$400 - $800|
|Title Insurance||Insurance to protect lenders in case of a land dispute.||0.50% - 1% of the home purchase price.|
|Documentary Stamp Tax On the Deed||Florida State tax on property deeds. The seller is usually responsible for the cost, however.||0.7% of the purchase price outside Miami-Dade County, 0.6% of the purchase price in Miami-Dade County and an additional 0.45% surtax for non-single-family homes|
|Documentary Stamp TaxOn Your Mortgage||Florida state tax on your mortgage agreement.||0.35% of the mortgage amount.|
As well, if you are getting a mortgage loan for a house in the US, fees related to this can include:
|Fee Name||What is it?||Estimated Cost|
|Credit Report Fee||Used for your lender to obtain your credit report.||$25|
|Application Fee||For processing your credit application.||$350|
|Loan Origination Fee||Total cost to put together your mortgage loan.||0.5% - 1% of your loan value|
|Legal Fees||A Lawyer to verify all your documents.||$600 - $1300|
|Discount Points||Upfront payment that can be purchased at an extra cost to reduce your mortgage interest rate.||1% of your loan amount per point; each point saves you 0.25% on your interest rate.|
|Prepaid Interest||Interest charged between your settlement date and first mortgage payment.||Based on the number of days interest has accrued prior to your first month.|
After understanding how much these costs may be, it will be important to put together a budget of what you are comfortable spending. It is also important to determine how much you can afford based on factors such as your down payment, credit score, and debt-to-income ratio.
As well, your budget should also take into consideration how much you can afford in terms of on-going monthly expenses. Common expenses after you purchase your property include:
In addition to the added monthly costs, it's important to consider if you will rent the property out or not. This may result in added income to help cover costs, however the added headache of renting the property should be considered, especially while being in another country. If you do plan on renting the property out when your not there, additional costs may include:
After taking into consideration all these factors, if you're still unsure of what your budget should be, speak to your personal banker at home, a local mortgage broker, or your financial advisor for advice.
When you're looking for a potential vacation house, winter house, or a rental property, it's important to be comfortable with the area it's located in. Remember, the location is one of the only aspects about the property that you cannot change! This will mean using your local knowledge of the area, while doing some research in order to find a neighborhood or town that fits your needs. Things to consider may include:
When determining both where to purchase and what type of property you want, your current family situation is crucial to consider. For example, if you have kids, you may want to look in an area close to landmarks such as Disney World or SeaWorld. However if not, you may want to find a place closer to the beach or in a quieter location.
A good way to start your search is in areas you are familiar with and have been before. The experience that you have had visiting or living in different locations in Florida can be helpful information to base your search on.
Having someone that understands both the property market in your search area, and the process for a foreign buyer will be invaluable in helping you. Since the cost of a real estate agent is paid by the seller at the time of purchase, there isn't financial incentive to embark on the process alone. If you don’t already have an agent in Florida, doing some research into finding an agent with international experience can be beneficial. This may include calling up local real estate agents within your search area, and even contacting your real estate agent at home about referrals in Florida. Getting a referral may take some uncertainty out of the process of finding an agent, with the added comfort of having a stamp of approval from someone you trust.
With both the help of your agent finding and showing you properties, along with your own searching through Florida’s MLS, it’s time to find the perfect property for you! Important tips to remember when searching are:
Having already considered closing costs when determining your budget, there shouldn't be any surprises left in the home buying process. What's left at close for you to do will be:
Although specific details along the process of buying a house in Florida and the USA vary from Canada, the general process to follow is similar. This includes figuring out how you will fund the purchase, determining your budget and where to look, and then finding a real estate agent and a property that fits your needs. Along this process, with the help of experienced professionals, you will accomplish your goal of purchasing a house in Florida!