With the warm weather, similar culture and rather close proximity to Canada, Florida has become a favorite 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.
Step 1 – Where Will Your Funding Come From?
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:
- Use a Home Equity Line of Credit (HELOC) from a property in Canada,
- Refinance the mortgage on a current Canadian property you own to take out the cash needed to fund the purchase, or
- Continue saving and purchase a property once you have saved enough money
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.
Step 2- Implications Of Buying in the USA
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. |
Step 3- Determine Your Budget
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:
- Maintenance costs,
- Property taxes,
- Home Owner Association (HOA) fees,
- Home insurance, and
- Utilities
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:
- Property management fees, and
- Booking fees
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 Florida Mortgage Lender, or your financial advisor for advice. Lowest rates are for high-ratio mortgages (LTV > 80%). Asks us for a referral if you want to connect with a Mortgage Lender.
Step 4 – Where Do You Want To Purchase?
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.
A good way to start your search is by checking the 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.
Step 5 – Gulf Coast vs Atlantic Coast Beaches
While Florida is home to many of the nation’s top beaches, which commonly receive top reviews and accoldates by TripAdvisor and other popular review sites each year, let’s take a look at the actual differences between the two Florida coasts and how beaches are different. Florida’s Gulf Coast, which is famous for its powder-like, white-sand beaches and emerald-hued waters, offers beachgoers a slightly warmer water temp (up to 5° more in the summer months) and calmer waters which is great for watersport activities such as stand-up paddleboarding and kayaking. With its whiter, brighter sand, it doesn’t retain the heat of the sun and will feel cool to the touch even on the hottest Florida day.
Florida’s Atlantic Coast beaches, by contrast, have more of a light brown, golden tone to them and will feel warmer to the touch. Florida’s east coast beaches are also usually windier due to the Atlantic Coast breeze. This creates larger waves and is much better for surfing, especially in the areas of New Smyrna Beach, Daytona Beach and Ormond Beach. Another difference between the coasts is that beachgoers to the Atlantic beaches will often see large cruise and cargo ships in the distance as these are designated shipping channels.
Step 6 – Start Your Property Search!
With both the help of your agent finding and showing you properties, along with your own SEARCHING FOR PROPERTIES, it’s time to find the perfect property for you! Important tips to remember when searching are:
- You might not succeed with your first offer. This can be normal! Continue searching and remain positive,
- Lean on your real estate agent for advice. They can give you information on what potential properties your looking at may sell for, and can help you make a competitive offer, and finally
- Start within your target area and budget. As your search progresses, look at expanding your search criteria and budget, within reason
Step 7 – Closing on Your House!
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:
- Moving furniture and personal belongings into your new house,
- Changing the locks and meeting some of your new neighbors, and
- Enjoying your new house in the warm state of Florida!
Conclusion
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!