7 Steps to Buy Property in Florida as a Canadian
Florida is an ideal destination for Canadians to buy a vacation home, especially looking for one that is affordable and can double as a short-term vacation rental or other type of income property. For years, Florida has been a popular destination for Canadians' vacations.
There are a few things you should know about how to buy property in Florida as a Canadian, and we have 7 steps listed out below to help you prepare.
1. Determine Your Funding Source
Before taking any other steps to buy a property in Florida as a Canadian, understand the funding options available to you and plan ahead. There are essentially two categories of ways to fund your purchase: cash or mortgage.
Buying with cash can be funded in one of four ways, or a combination of them:
- Refinancing your current Canadian home and taking out enough cash to buy a Florida property outright
- Open a Home Equity Line of Credit (HELOC) against a Canadian property and use those funds to purchase the Florida home
- Cash out an investment or multiple investments to reinvest in Florida real estate
- Save up enough cash to have a realistic budget
All of these methods may also be the best way to fund the down payment, which will generally need to be 20% or higher to buy property in Florida as a Canadian.
If you plan to mortgage some of the purchase, there are two routes you can take. Some Canadian banks offer US mortgages, including TD and RBC. Especially if you are already banking with them, you may be able to qualify for a mortgage to fund your Florida purchase without having to work with a foreign bank.
In order to get a mortgage with a US bank, you will need to establish good credit in the US. To do this, open a credit card account or line of credit while visiting the US, and then make on-time payments regularly, keeping a zero balance or close to it. Over time, this will build your credit score, allowing you to qualify for favorable mortgage terms in the US.
2. Consider the Unique Factors in Buying Real Estate in the US as a Foreigner
Even if you have already purchased real estate in Canada, there may be a learning curve when you set out to buy property in Florida as a Canadian. Be sure you are aware of both the currency exchange rate and relevant snowbird regulations before making your plans.
As exchange rates fluctuate, your loan obligation may be impacted. Be prepared with a financial cushion in case your debt obligation increases significantly.
Snowbird regulations specify that Canadians without US citizenship or a green card may not stay in the US for more than six months out of the year. If you do not have dual citizenship or a green card, this will impact the way you use your Florida property.
3. Determine Your Budget
As you determine your budget, there are a few factors that some people forget that you should consider. Closing costs in Florida are about 2.3% of the purchase price, on average. Be prepared with cash to cover these costs at closing, and take this into account as you determine your budget.
Other fees and costs that may be associated with buying US real estate as a Canadian include:
- Appraisal fees, which are usually around $350
- Home inspection fees, which generally range from $350 to $600
- Title search fee, usually between $400 and $800
- Title insurance, generally 0.5% to 1% of the purchase price
- Documentary stamp tax on the deed, between 0.45% and 0.7% of the purchase price
- Documentary stamp tax on the mortgage, 0.35% of the purchase price
- Credit report fee, about $25
- Application fee, about $350
- Loan origination fee, between 0.5% and 1% of the purchase price
- Legal fees, generally between $600 and $1300
- Discount points, 1% of your loan amount per point (each point will reduce your interest rate by 0.25%)
- Prepaid interest
Don't forget to also take into consideration homeowner's insurance, HOA fees, property taxes, maintenance costs, and utilities. If you plan to use your home as a vacation rental, also factor in property management and booking fees.
4. Narrow Down Your Location
After determining your budget and funding source, it is time to decide where you would like to buy property in Florida as a Canadian. The location of your home is one of the only things you cannot change, so it is also one of the most significant factors as you decide which property to purchase.
When looking for the right location, do some research about crime rates, neighborhood demographics, local amenities, proximity to airports, and occupancy rates for vacation rentals in the area. This should help you narrow down your list, and from that point it is best to visit the locations yourself to find out which you prefer most.
5. Find a Local Real Estate Agent
Working with a local real estate agent is essential in helping you identify the right city, and furthermore the right neighborhood and street to meet your budget, wish list, and personal style preferences. Having a real estate agent on your team who understands the local market and is familiar with foreign buyers will make all the difference.
6. Start Your Search
After determining your budget and ideal location, you are ready to work with your agent to find the right property. Be mentally prepared for the ups and downs of shopping in this hot real estate market, where many buyers to not have their first, or even fifth, offer accepted. Lean on your agent for advice and support; with strategic searching and an agent who excels in negation, you will be successful
7. Close on Your Ideal Property
After your offer is accepted, you just have to work through escrow, where you will have the property appraised and inspected, your financing will be reviewed again, and everything will be finalized. Get ready to furnish the property and enjoy your first vacation in your own Florida vacation home!
To get started on the exciting process of buying your Florida vacation home, contact our office anytime. We are ready to help you find your ideal property.