What a Non-U.S. Resident Should Know Before Buying a House in the U.S.

Nov 30, 2021 | Blog

Despite some difficulties, non-U.S. residents can buy a house and secure a mortgage in the U.S. Whether you’re looking for an investment property or a place to put roots down in the country, there are a few different ways to navigate the homebuying process as a non-U.S. resident.

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Avantgarde Lending aims to simplify deals for buying property. We can take on loans that are too challenging for traditional institutional lenders. This is especially true for a non-U.S. resident who may not be able to show an extensive employment or credit history in this country.

Our goal is to help you with your unique situation and to provide a respectful experience that focuses on everyone’s best interests.

The ins and outs of homebuying for a non-U.S. resident can be complex. Let’s look at a few of the main things to keep in mind so that you’ll feel more confident as you look for property in the U.S. and can understand your best possible options for doing so.

1. Non-U.S. Residents Can Get a Mortgage Here

Non-U.S. residents may get a mortgage in the states but likely not from federally-backed groups like Fannie Mae or Freddie Mac. The exception is that if you have a work visa or permanent residency (a green card), you may qualify for more traditional mortgages through Fannie Mae or an FHA loan.

Qualifications with Traditional Lenders

A Non-U.S. resident applicant should meet at least some of the following qualifications to get approved by a traditional lender:

  • Credit score of 720 or better, ideally 780+
  • Two years of credit and tax returns in U.S.
  • Ability to pay a 20% downpayment
  • Valid Social Security Number or Tax Identification Number
  • Existing U.S. source of income that is expected to continue for at least three years
  • Been in the U.S. for at least two years
  • At least two years of U.S. work experience

Work Visas

If you’re applying for a traditional loan and you have a work visa, you’ll be required to show your Employment Authorization Document. If you’ve worked for that employer for less than a year, the lender may request a letter from your employer stating that they intend to renew your employment contract.

Traditional lenders want to see that you will be able to live and earn income in the country for at least three years once you get a loan.

Non-Resident Obstacles

Lenders that allow non-U.S. residents to borrow must hold the loans themselves, which means that non-residents may be subject to bigger obstacles. Non-U.S. residents may face a higher interest rate or down payment since the lender will have more at risk.

Loans granted to non-U.S. residents can become nonconforming loans, meaning they exceed conforming loan limits backed by government-sponsored enterprises such as Fannie Mae or Freddie Mac. This is where a higher interest rate may apply since these loans are not federally-backed and the lender wants to ensure that your loan will be paid back.

The approval process for a non-U.S. resident is typically harder and longer than for a U.S. citizen.

This is why it’s recommended that foreign buyers make all-cash offers for property, whether through a cash loan (check out number 6 below) or by purchasing in an affordable area of the U.S. where it’s doable to make an all-cash offer yourself.

If you don’t have income tax returns or credit history in this country, you may be asked to provide tax returns, bank statements, and several months of credit statements from your home country.

There are companies in the U.S. that help non-residents get credit cards and build credit in the country, to eventually secure a loan. It’s suggested that foreign buyers build up a few years of credit history in the U.S. to prepare for a loan application.

2. You Need to Pay Taxes on the Property

All homeowners in the U.S. must pay property taxes, regardless of their citizenship status. Even foreign buyers will be subjected to taxes on the property that they own in the states. These can sometimes be rolled into the monthly mortgage payment. However, if you made an all-cash purchase, you will be responsible for separately paying either monthly or annual taxes on the property.

These tax amounts will vary by location. International buyers should make sure to research these taxes and fees to ensure they know what they’re responsible for and if they can afford them. Such taxes and fees may not be common in countries other than the U.S. so be prepared for the location that you’re planning to buy in.

Keep taxes in mind, as well, if you plan on selling the property in the future. The U.S. has the Capital Gains Tax, which is a tax on the value growth of investments. This means that you will be taxed on the amount that your property has increased in value since you bought it if you have had the property for more than a year.

3. Condos or Residential Buildings May Have More Fees

In addition to taxes, some residential buildings or condominiums may have additional fees for things like maintenance or luxury items provided by management. These are sometimes referred to as Homeowners Association fees.

This is common in large cities such as Los Angeles or New York. These are just more costs to be aware of depending on the location you buy in.

4. There Are Special Programs for Investment Buyers

If you’re a foreign buyer looking for a house as an investment property in the U.S., you may be able to work with a lender that offers foreign national mortgage programs.

These loans may come with higher interest rates than a traditional loan but allow those who don’t plan on becoming a permanent U.S. resident to own an investment property in the country.

5. All-Cash Purchases are Easiest for Non-U.S. Residents

By paying for the property in all cash or with a cash loan, non-U.S. residents won’t need to worry about qualifying for a traditional mortgage. This is where hard money loans come into play for non-U.S. residents to purchase property in the U.S.

Hard money, or private money, loans are acquired from an individual or funding group. Loan terms are negotiated between the lender and borrower, making it a quicker process. They also often won’t require the same information as a traditional lender. These loans will, however, often have a slightly higher interest rate than a conventional loan.

A hard money lender will want to know that you’re able to pay the loan back but won’t require things like long credit history or income verification. The property you purchase with a hard money loan is used as collateral.

That’s why if the deal makes sense for the hard money lender, they will typically approve your loan. Contact us today to find out if Avantgarde Lending can help you. We can review your hard money loan request, or you can apply now and we will contact you soon.

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