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Moving to the Washington or California: A question in many parts
August 26, 2012 1:08 PM   Subscribe

Several opportunities for my family to move to the States from Canada have come up and we are considering moving however we, early 30's SAHM and Husband + toddler, have no idea how basics such as down payments, mortgages, health insurance and retirement accounts work down there. We are considering a move to Bellevue, WA or Mountain View, CA so any advise on deciding between these two would also be great :) We are well versed in how all of these things work in Canada and are current home owners, so Bonus points for any side by side comparisons of how the American and Canadian systems differ or are similar.

I have turned to google for answers but I keep seeing references to "points" and "FHA loans" etc that I am not familiar with. Also, I frequently see questions here on the green about people in terrible trouble with poor health care, bad mortgages, balloon payments, which worries me. So help us learn so that we can make an informed decision. I am looking for nice clear introductions, links or summaries of:

HOUSING
- How do US mortgages work and what is "normal"?
- Does every place sell off your loan? Is this even bad?
- What are standard down payments, post crash, and what happens if we only have 10% down?

HEALTH INSURANCE
- What is "good coverage" and how much do you spend out of pocket on top of your employer coverage?
- How expensive is having a baby? Do you pay anything out of pocket (with insurance)?
- In network/Out of Network providers? What happens if you are away from home?
- Pre-existing conditions? If I am pregnant when we start coverage will that be a problem? Can coverage of the pregnancy be denied? We would like to start trying now for baby #2 but given this move might happen in 2-3 months we are wondering if we need to/should wait.

MISC
- Tips or an introduction to living as an expat?
- Retirement accounts, 401k wtf?
- Saving for University for the kid(s)?
- Bellevue, WA vs Silicon Valley? (we have lived in Vancouver and loved it so we are familiar with the malls of Bellevue and the weather)
- School districts? Just yesterday I was reading a question here about lying to get into a better school. I have never heard of that before in Toronto/Vancouver. Are the "bad" schools that much worse? How do you even find out what a school is rated and what school zone a house is in?

Thanks so much for any help you can give me on my huge list of questions.

Though being able to attend IRL Mefi Meet-ups would be cool!
posted by saradarlin to Work & Money (20 answers total) 5 users marked this as a favorite
 
I know a significant number of Canadians who got US job offers but never took them because one family member had a pre-existing condition (congenital heart disorder, epilepsy, depression, MS, etc). You should confirm that you would all be eligible for health insurance that would cover anything you have been treated for in the past couple of years. This is a serious concern that you should not take lightly.
posted by jeather at 1:18 PM on August 26, 2012 [2 favorites]


> How do you even find out what a school is rated and what school zone a house is in?

Bellevue has a reputation for good schools. You can see here where the catchment areas are.
posted by The corpse in the library at 1:20 PM on August 26, 2012


> Pre-existing conditions? If I am pregnant when we start coverage will that be a problem?

Legally, pregnancy cannot be considered a pre-existing condition.
posted by The corpse in the library at 1:22 PM on August 26, 2012 [1 favorite]


> Saving for University for the kid(s)?

The general advice is to save for your own retirement first; the kids can take student loans, but you can't take retiree loans.
posted by The corpse in the library at 1:26 PM on August 26, 2012 [1 favorite]


For university savings I meant special accounts. For example, in Canada we have RESPs which grow tax free and have other benefits.
posted by saradarlin at 1:34 PM on August 26, 2012


You might want to make an appointment with an accountant that specialises with American/Canadian taxes. Go in with your current situation and the hypothical American job and see how much money you have in your pocket after taxes and deductions are taken into account. (It is a bit of a myth that Canadians pay higher taxes than Americans do).

A book that touches on some of your questions (mortages, health care. and the impact on housing of the crazy school district situation) is the Two Income trap by Elizabeth Warren. It still applies to you even though you are a one income.

You might also be interested in Michael Adams work comparing Canada and US society and politics.

Personally, moving within Canada I always take a very close look at how the local government handles their money and what their priorities and debt loads are. I would do the same in the US.
posted by saucysault at 2:00 PM on August 26, 2012 [1 favorite]


> For university savings I meant special accounts

Ah, okay. We have things like 529s and GETs. We (as in Mr Corpse and I) went with 529s, as they're more flexible and college isn't for everyone, but I think most people I know -- if their kids have any college funds at all -- have GETs.
posted by The corpse in the library at 2:24 PM on August 26, 2012


I'll take a stab at this... Just bought my second house and I work in employee benefits...

For health insurance, what you are offered depends on your employer. Plans range widely, and some states regulate coverages (for example, out of pocket max can't be greater than ten thousand dollars for a family). Unfortunately, I don't know what the regulations are for the two states you are looking into.

But you will likely be offered one of two plan types, and I am simplifying here for brevity. The first is a copay based plan, where you pay $20 for each doctor visit (for example). Hospital visits and specialist visits will have a different copay, usually higher. The second type of plan will be a cost share plan, where you will often have a deductible to satisfy before your insurance kicks in, and then you will pay a percentage of each bill until you reach your out of pocket maximum (which will vary widely). You can contribute whatever this amount is (and more) to a pre-tax savings account, which can be useful if you know you have an event like a baby being born. I have this second type of plan, and am pregnant, and will pay $2500 out of pocket, which is my maximum. I work for a Fortune 50 employer and would say this is a pretty standard benefit for very large employers.

It is important to note that with the Affordable Care Act (obamacare), many preventive and women's care is now covered (or will be very soon). So your yearly physical, your pap smear and birth control, and your baby's well visits will all fall in this category. Pre-existing condition denial will be removed in 2014. There is a good site explaining all the changes at healthcare.gov (on my iPad, google affordable care act timeline for the site).

For mortgages,if you only have ten percent down, chances are you will need to go FHA over a conventional loan. I am going to answer this as if you will be going FHA. FHA requires 3.5% minimum as a down payment. They also have a more generous threshold for debt to income ratios, so you can generally qualify for a payment that would bring your debt load to 26% of your gross income. Interst rates with FHA loans are actually more favorable than conventional loans, but the drawback is you would be paying insurance. The amounts of this are available on the Internet and it varies by what you put down, but it's safe to assume you will be paying around $100 per month for each 100k financed. You must pay this until your loan to value ratio is 78%, and this has to be actual value of the loan (so if your house increases in value drastically, that doesn't count). Also, insurance must be paid for a minimum of five years. Finally, your loan origination (what you pay up front) cost is higher than a conventional loan.

Plenty of people will tell you this is a terrible way to finance a house, due to the insurance, but I don't think that is automatically the case. In my area, the FHA rates were .4% lower than conventional rates, so if you plan on staying in the house and have the means to pay off the value of the house to 78%, you could actually pay less over the entire life of the loan thanks to the lower interest rate. This is a very specialized scenario, however, and tricky to count on if you are moving to a new area. My loan underwriter claimed that most of her business was FHA nowadays, due to the ease in qualifying, but this could definitely just be her company.
posted by smalls at 2:41 PM on August 26, 2012 [2 favorites]


If you put less than 20% down on a place, you're probably going to have to pay private mortgage insurance (PMI). That said, I'd recommend renting a place for the first year - it'll make it much easier for you to feel comfortable regarding different neighborhoods and school districts and interest rates aren't going to increase dramatically any time soon.

Employer health benefits will vary greatly regarding pregnancy coverage but one thing you could do to decrease your out-of-pocket costs is to set up a health savings account if your employer offers one. They allow you to put aside money tax-free over time to pay for eligible expenses. Suppose that between copays, deductibles, and odds and ends that insurance doesn't seem to cover - contact lenses or glasses, for example - you estimate that your out-of-pocket medical expenses over the next year will be about $1,200. With a health savings account, if you get paid twice a month, your employer takes $50 from each paycheck (24 paychecks in a year times $50 = $1,200) pre-tax. Then, when these expenses come up throughout the year, you may fill out a form and send a receipt or swipe a card linked to your account to use the money in the account.

I'm not wild about HSAs but if you anticipate having high out-of-pocket medical expenses, it's not a terrible idea. I used to put about $1,000 in every year for prescription copays and to buy myself glasses and contacts. There's typically a grace period built in too so you don't have to use all of the money within 12 months - in my experience, the deadline was something like April 1 of the following year. One thing that was obnoxious about it was that if you didn't use the money by the deadline, you lost it but if that was an issue, you can spend it on all sorts of stuff. I bought prescription sunglasses. Drugstore.com and similar websites have HSA sections so you can buy yourself sunscreen, Bandaids and Tylenol.
posted by kat518 at 3:14 PM on August 26, 2012


Make sure you are legally allowed to work in the US too. I hate to be a downer but I know several former SAHM that followed their husbands into a country they couldn't work in and had limited options when things went pear-shaped (not just unexpected divorce but one woman's husband became too ill to work and lost his health insurance, another who's husband could not find a job for two+ years, and another who's husband had to leave the country for work - leaving her and the children in a country she couldn't work in and not able to afford to return "home").
posted by saucysault at 4:28 PM on August 26, 2012 [3 favorites]


This isn't really on your list, but based on my own experience I would definitely recommend having a consultation with an accountant who specializes in cross-border (US/Canada) tax issues. You may be surprised at how much more complicated your taxes will become.

Since I'm not an accountant I won't try to make any specific suggestions except that you speak to someone who is.
posted by sonofdust at 7:28 PM on August 26, 2012


Taking a stab at some of these on your list:

How do mortgages work?

Most mortgages require a certain amount of money down, usually 20%, to get approval from the lender. There are some mortgage programs in the US that allow first time home buyers to put down a much smaller amount. The trade off is that for most of these programs you need to pay a monthly insurance premium on top of your interest, principal, taxes, and homeowner's insurance. This extra insurance is known as PMI and you can eventually stop paying it once you have reached 20% equity in your home. If you want to live in Bellevue or the Seattle east side, houses are expensive, speaking generally, so coming up with 20% for a down payment--in addition to all of the "start up" expenses you'll have when you buy a home and move somewhere new--might not be easy. It used to be very common to get loans in the US without having 20% down. That's less common now. I'm not sure how else to answer the Q about "how mortgages work," except to say that you'll apply for a loan, either directly from a lender or through a mortgage broker who works with a lot of lenders. You'll pay a fee of several hundred dollars to "lock in" the mortgage rate. You then will typically have about 45 days to close the loan. During that time you'll need to have the home inspected, this will also cost about $500. You'll fill out a myriad of paper work, provide proof of income, and arrange to have enough cash to close the loan on closing day. Most loans typically have closing costs of several thousands of dollars. The loan rate is set, in part, by your credit rating. If you're not American, you may not have a good credit rating in the US, and this may affect your ability to get a home loan. You asked what is "normal." A 30 year fixed interest mortgage is pretty normal, and loan rates are about 3.5% to 4% right now. It's also very common to get a loan with an adjustable rate, although I have never done this and would personally not.

Are all home loans sold to someone else? Not all, but almost all. This is typical. This personally has never been a problem for me. You just make arrangements with the new owner of the loan to make payments, etc. I'd prefer that my loan not be sold and re-sold, but it's not even a factor in my decision about which mortgage to get.

Not having 20% down, combined with not having a US credit rating (I'm assuming that you likely do not) will probably hurt you. The good news is that you need not buy right away. It might make more sense for you to rent for a year or two and figure out where you really want to live--or if the US is even where you want to live at all--and by that time you may be able to put more down and will have built up a credit rating. But I would expect that you will have more trouble getting a loan than an American with an established credit rating and 20% to put down.

I'm afraid I can't really answer your questions about health coverage, except to say that my coverage in the US has always been excellent. Things that I pay out of pocket for are chiropractic appointments, massage, and teeth cleaning in excess of two per year. I also pay out of pocket for some of my vision expenses because I opted not to get vision coverage.

Regarding "pre-existing conditions," this may or may not apply to your situation (and I cannot even imagine an insurer not insuring a pregnancy, but, who knows), but I had been living abroad for a few years and returned to the US and had to fight with my insurer about whether a pre-existing condition of mine was covered when I went back on US employer based health care. The rule at the time was that preexisting conditions were covered as long as I had no gap in insurance coverage. I made the argument that I didn't have a gap in coverage because I was insured by a national health plan while I was living abroad. The insurer relented, although I can imagine it might have gone another way, too. I found the experience enormously frustrating even though it resolved itself favorably.

Expat tips: I've been an expat in a country out of the US, so I don't know if this advice applies, but I made a lot more efforts to meet people and get involved in things than I ever did while living in the states. I took classes to fill my time when I wasn't working, met people through online expat communities (who I then met in real life), joined a writing group, joined a pub poker league, made a point to socialize with people from my wife's workplace, and made a point to socialize with my own coworkers once I got a job. It helped me, YMMV. I'm an introvert so this went against my grain, but it made me feel like I belonged and prevented me from feeling lonely.

Retirement/401(k): Very few American employers offer pensions (defined benefit plans). Instead, if you retire in the US, you'll need your money to come from three primary sources. First, from social security, which may or may not be available to you when you're retirement age. But this is more or less a government pension. It's not a huge amount of money. People who work now pay a tax on their wages, their employer pays a matching tax, and that money is paid out to current retirees until their death. If the system is still working the same way it does now when you retire, your benefits will be paid by people who are currently working at that time. I'm grossly oversimplifying. Your second source of retirement funds will be from tax-advantaged retirement investments. These are the 401(k) plans and IRAs (Individual Retirement Arrangements) and are "defined contribution" plans. You can put a certain maximum amount in each year, and the growth is not taxed until it's withdrawn years later. A 401(k) plan is something your employer offers. You pay a certain amount of your gross wages into it, up to a maximum of $17,000/year. Typically your employer's plan will have a variety of ways that you can invest that money--mutual funds, mainly. Sometimes your employer will kick in a contribution, too. Whatever money you contribute is subtracted from your income for tax purposes. So, if your salary was $100,000 per year, and you invested $10,000 of it in your 401(k), you would be taxed only on $90,000 of your income. So you receive an immediate benefit in the form of a lower tax bill. The big benefit, though, is that the money can grow and compound without you paying any taxes on it until you pull it out at retirement age. There are restrictions on how that money can be used and how soon it can be pulled out, for those reasons. An IRA is similar--if you earn income during a year you can invest up to $5000 of it, and reduce your income by that amount for tax purposes. There are some limits on the amount you can contribute if you make above a certain amount of income. There's also a defined contribution plan known as "Roth" IRAs/401(k), where you get NO tax deduction now, but you never pay taxes on the growth, even when you withdraw it. The third source of your retirement funding are from investments above and beyond what you put into the defined contribution plans. Sometimes employers have profit sharing that can go into a separate retirement fund for you, too, although these are not so common.

Saving for University?
I'll pass on this one except to say that there is preferential tuition for "in-state" public schools for state residents. So if you're going to live in CA or WA you might want your kids to get used to the idea that they're going to go to a CA/WA school. Having said that, public school tuition is rising precipitously, and it is not the bargain that it used to be. It might very well be possible that a private school can offer enough financial aid to more than make up for that gap. Other folks may have ideas about tax advantaged (529) plans for saving for school, or buying in-state tuition credits.

Bellevue/Silicon Valley--There's a thread today talking about Seattle/SF differences that you might find interesting. If you loved Vancouver, you could probably love Bellevue (and you wouldn't be limited to Bellevue--you could live in Seattle, on the Sammamish Plateau, or any number of places). Bellevue is not cheap, but it is not as expensive as Silicon Valley.

School districts: I've student taught in two Seattle area Eastside school districts, and both are pretty good school districts (neither were Bellevue school districts). Bellevue school district has a pretty good reputation, too, and I have a number of friends who are primary teachers there. I guess any particular school within those districts might not be great, but I personally wouldn't classify any of the major Eastside school districts as "Oh my God, you do not want your kid to go there."
posted by MoonOrb at 8:42 PM on August 26, 2012


If you are talking about MS, I worked there for ages and their health insurance is top freaking notch. They only JUST, this year (and the company has been around for like 25 years) suggested to their employees that they might institute a co-pay. Yes, that's right, until now all health care at MS has been no-copay, everyone is in network (Blue Cross/Blue Shield). In general, companies like Google and MS have gold-plated benefits because hiring engineers is so difficult right now. (MS I know has amazing benefits for pregnancy/birth). Both companies also should have very good procedures in place for hiring non-US Citizens. You should ask your partner to talk to his recruiter at each and have he or she walk you through their answers to some of your questions. If they are recruiting your husband enough to consider relo they'll want to get you and should be happy to help you out.
posted by alicetiara at 8:49 PM on August 26, 2012 [1 favorite]


Michael Bluejay's guide to buying a house gives a reasonably good introduction.
posted by LobsterMitten at 11:41 PM on August 26, 2012


Another thing about moving between Canada and the US is to check what you need to do to import your car properly (if you have a car).
posted by LobsterMitten at 11:44 PM on August 26, 2012


- How expensive is having a baby? Do you pay anything out of pocket (with insurance)?


Yes, lots. We have decent insurance with my husband's employer, and having our son still cost us thousands of dollars. It was amazing watching the bills roll in from all of the different providers in the weeks after his (easy, vaginal) delivery. We also paid about $3000 in installments to our OB clinic throughout the pregnancy for pregnancy care and the birth.

Please do not underestimate how completely, completely fucked up it is down here.
posted by that's how you get ants at 7:02 AM on August 27, 2012 [1 favorite]


As a Canadian expat who lives in the US now and the UK before that, one important thing to always keep in mind is the portability of your retirement plans. You might think your move is permanent but it probably won't be. People who move countries are people who tend to move countries. So you might well do it again. Don't get locked into a retirement plan in a country where you will not be and cannot influence/control it or worse yet claim it.

Also because you move countries part way through the year you can also often access the money without the full tax hit because you will possibly drop a tax bracket or two in the year you move depending on when you move. Some places have plans that can allow you to transfer your retirement money from your previous countries/employers plan to your new one which can simplify keeping track.

Oh and steer well clear of obnoxious condo and home owner associations. America may be the land of the free but it doesn't seem to apply to busy bodies who want to ensure that freight elevators are only used for moving at times when movers can't deliver or you have to take a day off work.
posted by srboisvert at 8:14 AM on August 27, 2012


Thanks guys for the wonderful advice and tips. We are considering our options and even if we are actually willing to leave Canada as we do really like just about everything up here (except for no Amazon Prime, that sucks).
posted by saradarlin at 5:44 PM on August 28, 2012


A second follow-up, California here we come!!
posted by saradarlin at 1:30 PM on September 26, 2012


An adventure! Have fun!
posted by that's how you get ants at 2:23 PM on September 26, 2012


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