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Instead of paying rent, my wife and I are thinking of buying a house and building up our equity while living temporary here in the US. Is it a violation to own a property since the regulations state that: "TN is a Temporary entry, as defined in the NAFTA, means entry without the intent to establish permanent residence"?
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Don't overthink this issue. Even Cdn tourists can own property in US, so a TN can obviously too. You need to have good Cdn credit history if you buy soon after entering US (I bought 12 days after arrival). You will need to deal locally, as on-line mortgage vendors will not take the time to look at your Cdn credit. You need manual underwriting. Having a decent downpayment will help, but is not required.
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If you have 24 months of US credit history then you don't need to use your Canadian credit history. In that case it is also possible to do the common 80% 1st and 5/10/15% 2nd mortgage option that is available to other US residents. That means that you can hold onto your cash and still avoid PMI (mortgage insurance).
I wouldn't count on any guarantee of "building up [your] equity". There are a lot of factors that may cause a stagnation or even fall in housing prices in many areas. For a new buyer who may have to leave at very short notice (i.e. someone on a TN) then having a protection against housing market downturns would be very prudent. Putting the minimum amount down possible while still keeping your interest rates low will buffer you to some degree if that happens. Some states, such as California, make it difficult to impossible for the mortgage holder to come after you other assets if you decide to turn the house over to them. The less cash you have in the house then the less turning it over to the mortgage holder will hurt you.
You really want a worst case exit strategy. It will hurt if you have to use it but you want to make sure that it will hurt as little as possible.
Stuart G.
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For what it's worth, I'd recommend against it generally. Anything can happen to your job, then you're stuck selling a house, and don't count on breaking even for at least a couple of years ownership. The market has done well, but it may not as of now - you never know!
Only you know your financial situation, but unless you're talking long term, the whole thing about "stop throwing money away into rent" is highly overrated. We pay $1100/month mortgage, plus water, sewer, garbage, increased power bill, vs. the $750 we were paying for a nice apartment before. I'm glad we're doing it but $400+ difference is a lot of equity right there, if you sock it away.
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I will second Matt's recommendation against buying on a visa/work status "in general". Don't do it unless you are able to handle losing every penny that you paid on downpayment, closing costs, and monthly mortgage payments. If the housing market you are in drops (and they all do from time to time) and you lose your TN status and return to Canada this may be exactly what happens. These aren't even independent events - a downturn in your local economy may cause the loss of your job and a general downturn in the housing market.
If you do have the asset base to take such a loss then you want to minimize the effects of such a worst case scenario. You do that by putting as little money as possible into the deal.
Stuart G.
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Tax and other financial matters concerning Canadian professionals
in the U.S. and U.S. citizens in Canada Includes income and estate taxation, social security, health
insurance, retirement accounts, cross border tax issues, and other matters affecting your pocketbook.
Topic Administrator: Mark T. Serbinski, CA, CPA of Serbinski
Weinberg, Ltd. CPA's and Serbinski Partners, Chartered Accountants
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