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Arizona is a popular destination for Canadian snowbirds. In fact, 66% of international buyers in Arizona are Canadians. If you’re considering buying real estate in the US, part of your expenditure will include closing costs– expect to pay between 1.21% and 1.82% of the property purchase price.
Closing costs are the administrative and legal fees a property buyer will incur when finalizing a home sale. Property insurance, prepaid utility bills and title insurance are a few of the expenses that are typically included in closing costs. It’s important to estimate closing costs because they can be several thousand dollars.
The average closing cost in Arizona is US$3,631 after taxes (as reported by ClosingCorp). This is approximately 1.21% to 1.82% of the final home sale price.
The average home price is between US$200,000 and US$300,000 throughout Arizona. If you purchase a home in that range, your closing costs will be between US$2,421 and US$5,447.
Common closing costs for Arizona home buyers include loan origination fees, credit report fees, home appraisal fees, home inspection fees, escrow fees, flood certification, title search, insurance, postage, courier fees and survey fees. Not all of these costs are predictable, so be sure to keep extra cash handy.
Arizona doesn’t have a land transfer tax. In addition, Canadians are not charged additional fees for being a foreign buyer, unlike states such as Florida.
Canadians snowbirds in Arizona typically need to have a down payment between 25% and 30% of the purchase price if they’re working with a US lender.
While many Canadian lenders do not offer mortgages for US property because it is outside of their jurisdiction, some Canadian lenders do operate in the US. There is an opportunity to borrow with a Canadian lender if it operates in the state where you want to purchase property.
Your down payment will likely be payable in US dollars regardless of whether you work with a US or Canadian lender, so be mindful of the exchange rates and the additional cost that comes with it.
In the state of Arizona, buyers and sellers split the cost. A breakdown of who pays for what can be found below.
Type | Cost |
---|---|
Lender title policy premium (for new loans) | Varies |
Other new loan charges (i.e. origination fees) | Varies |
Fees related to assumption of existing loan | Varies |
Escrow fee (one-half) | Varies |
Flood certification | US$10 |
Survey | US$300 to US$400 |
Document preparation | US$25 for credit report, additional costs may apply |
Notary fees | Varies |
Recording charges for all documents in buyer’s name | US$30 to US$60 |
Homeowners association transfer fee (one-half) | US$200 to US$250 |
Home warranty premium per contract | Varies |
Hazard insurance premium for first year | Varies |
Type | Cost |
---|---|
Owner’s title insurance premium | Varies |
Real estate agent commission | Varies |
Escrow fee (one-half) | Varies |
Financing fees related to mortgage held by seller | Varies |
Termite inspection and repairs per contract | US$532 average in Arizona |
Home warranty premium per contract | Varies |
Homeowners association transfer fee (one-half) | US$200 to US$250 |
Any judgments, tax liens against the seller | Varies |
Recording charges to clear all documents of record against the seller | US$30 to US$60 |
Prorated property taxes plus delinquent taxes | Varies |
Any unpaid homeowners association dues | Varies |
Any bonds or assessments per contract | Varies |
The seller usually pays for title insurance for a home purchase in Arizona.
You may need to work with a US lender to secure a mortgage for a property in the US. Canadian lenders generally don’t have jurisdiction in the US, which means they can’t finance a mortgage there. The only exception is Canadian lenders that operate in the US as well. Be sure to determine what their jurisdiction is before submitting an application.
If you can’t find a Canadian lender to finance your US property purchase, don’t worry. Since Arizona is a popular real estate purchase hub for Canadian snowbirds, many local lenders are willing to work with you.
There are some limitations when buying a condo in Arizona. Lenders require that at least 51% of condo units in a complex are not rental properties. In addition, lenders will not finance a mortgage if more than 10% of the units in a complex are owned by a single person.
Condo owners are required to pay condo fees, which is the cost to maintain the property and amenities. Arizona condo owners are also required to pay homeowners association fees. Both these costs are subject to fluctuations, which could drastically affect the operating cost of your property.
When you buy a co-op, you don’t own real estate. Instead, you become a shareholder of the corporation that owns the building. A co-op is basically a nonprofit organization with a board of directors and each resident is a shareholder in the property. The idea of a co-op is to build an engaged and passionate community.
To purchase a co-op, you don’t need a mortgage. Rather, you will need enough funds to purchase shares in the co-op. As a Canadian foreign buyer, it can be more challenging to find financing for this kind of purchase because there won’t be security tied to the loan, which would usually be the property.
In addition to the cost of financing and closing costs, you are required to pay prorated costs to maintain the building. These include property taxes, mortgage payments, heating, water, insurance and staff wages.
Canadian snowbirds in Arizona benefit from lower closing costs compared to other popular states. Closing costs are difficult to estimate, but it’s a worthwhile process. Once you understand the closing costs, don’t forget to factor in exchange rates as the closing costs may be payable in US dollars. To keep your closing costs low, consider working with an expert.
SPONSORED: Canadians love buying property in the U.S., especially in warm-weather states where they can escape the winter.
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