HOW TO GET A MORTGAGE IN THE USA AS A FOREIGNER?

 HOW TO GET A MORTGAGE IN THE USA AS A FOREIGNER?

Due to rising real estate prices in the United States, more and more foreign investors are seeking financing for their purchases. Whether you want to buy a home in the United States to live in or use it as a profitable investment, there are several ways to finance the purchase of real estate. Non-U.S. citizens must consider several factors when looking to borrow money. These are requirements to be aware of before committing. Invest US explains how to obtain a mortgage in the United States as a foreigner.

Applying for a mortgage in the USA: what should foreigners know?

As a foreign borrower, there are some things you absolutely must know.

No coverage from mortgage giants

The U.S. mortgage giants, Fannie Mae and Freddie Mac, own or guarantee the majority of U.S. home loans. Because they don't purchase non-resident mortgages from lenders, the lenders must record the loans on their own books.

Apart from the fact that they cannot easily sell these loans on the secondary market, they become less attractive as it is more difficult and more expensive to trace borrowers abroad, whether for late payments or failure to meet their loan repayment obligations.

Higher mortgages

Foreigners can, of course, obtain loans from many American banks. Instead of traditional mortgages, these banks offer financing options that benefit from their own underwriting rules and often higher interest rates.

A larger initial contribution

Because foreign buyers present a higher credit risk, lenders often require a much higher minimum down payment than U.S. citizens. This down payment is usually around 30% of the sale price.

A stricter approval procedure

Of course, when it comes to verifying the income and information of foreign citizens, the process is longer and more tedious for lenders. As a result, they typically request bank statements and tax returns from the applicant's home country. Instead of a credit report, which is typically required of a U.S. citizen, lenders may request several months of credit card statements from foreign applicants to examine their borrowing habits.

Longer procedures

For foreigners, the process of getting approved for a mortgage loan takes longer than for U.S. citizens. It is possible to expedite the application process by applying for a mortgage from an international bank with a presence in both the United States and your home country. In some cases, you may also be able to qualify for a lower interest rate.

A Green Card or work visa to gain more opportunities

If you're working legally in the United States, even on a temporary work visa, or you're a permanent resident with a Green Card, you can qualify for Fannie Mae or Federal Housing Administration (FHA) loans. You may need to provide additional information to lenders to prove your status; your work visa may also need to be extended.

Tax laws are more complex

Foreign buyers must consider the tax laws of several countries. This is because different countries have different tax treaties with the United States. As a seller of foreign real estate, you are subject to U.S. capital gains tax. The IRS (Internal Revenue Service) automatically withholds 10% of the gross purchase price and then adjusts accordingly when the seller files their U.S. tax return.

While it is possible for a foreigner to obtain a mortgage in the United States, the process can be fraught with challenges. According to the National Association of Realtors (NAR), nearly half of foreign buyers choose to pay cash for residential properties. Of course, if this isn't an option for you, another option is to find a more affordable property in another region or geographic area.

Steps to Obtaining a Mortgage in the USA as a Foreigner

Credit check

If we were to present a non-exhaustive list of the process for obtaining a mortgage in the USA as a foreigner, it could be summarized as follows:

You don't need to have a U.S. credit history to apply for a mortgage. An international credit report can be obtained from your bank upon request. Additional information may be required to complete the credit check.

Production of essential documents

Applying for a mortgage in the United States requires submitting a number of documents. These documents can vary from state to state; therefore, it's important to research the regulations and requirements of the state in which you're planning to purchase your property in advance. Generally, the following documents are required:

Identity card or passport

Income tax return; tax notice

Documents related to your employment

Assets

All required documents can be reviewed by a real estate attorney. A tax expert will also assist you in understanding your potential tax obligations.

Signing of the deed of sale

Closing a sale agreement is the final step in purchasing a home in the United States. During this final phase, the buyer signs the legal documents and pays all fees necessary to transfer ownership. In addition to the buyer, other parties involved in finalizing a transaction may include the seller(s), the seller's attorney, the buyer's attorney, the bank representative, and the insurance company representative.