Maybe you plan to move to the USA or you just want to go on vacation frequently, in that case, you want to know if a foreigner can buy a house in the United States. Stay with us, we will explain it to you in detail.
We have good news for you, anyone can buy a house in the USA, regardless of their citizenship. But there are a few things to keep in mind.
Can a foreigner buy a house in the United States?
Of course, yes, a foreigner can buy a house in the United States. The easiest way to do this is by making a cash purchase.
If you need financing (a mortgage), you will have to meet certain requirements.
Most lenders require foreigners to comply with the following:
- A minimum credit score of 720 (ideally 780+).
- Be able to make a 20% advance.
- Have a valid SSN or ITIN.
- Have a source of income in the United States and that income continues for at least 3 years.
- Have been in the United States for at least 2 years.
- Work experience in the US of at least 2 years.
Taking out a mortgage will be easier for a Green Card holder or someone working in the US with a visa than it is for someone living abroad with no ties to the US.
Foreigners in the US can even qualify for government-backed mortgages. This is a type of subsidized mortgage to protect lenders from delinquency. The best-known government-backed loan is the Federal Housing Administration (FHA) loan, which is available to both permanent and temporary residents.
The options available to you also depend on the time you have been in the country and your ability to pay. As a foreigner, your credit report may not have enough data to establish a reliable credit history.
This means that assessing your creditworthiness will be more difficult for lenders if you have been in the country for less than 2 years. Borrowing yourself money can be considered riskier. You may need to raise your credit score before applying for a mortgage.
If you meet the requirements mentioned above, you will likely find a lender who will grant you a mortgage.
Green Card Holders
Green Card holders have some advantages when applying for mortgages in the US they receive almost the same privileges as US citizens when they need a mortgage.
Fannie Mae and Freddie Mac are government-sponsored companies that offer affordable conventional loans to U.S. citizens. Green Cardholders can take advantage of FHA loans and loans from Fannie Mae or Freddie Mac, as well as US citizens.
This means that as a Green Card holder, you have a good chance of buying a house with just a 3% down payment. But be prepared to comply with the regular mortgage documentation anyway. It will always be better if you have been in the US for at least two years and if you also have two years of work history and are paying taxes.
All lenders will ask for your tax returns for the past two to three years, your credit history for the past two years, and your bank statement for at least two months. Other requirements may vary depending on the lender.
Temporary non-resident foreigners
Temporary nonresidents may also qualify for mortgages. If you are in the US with a valid work visa such as an E-1, E-2, H-2A, H-2B, H-1B, H-3, L-1, or G-1 to G -4, you also have the option of requesting a loan from the Federal Housing Administration. In this case, you may need to present an employment authorization document and a social security number (SSN).
If the contract with your employer expires in less than a year, the lender may request a letter from your employer showing their intention to renew your contract. Lenders will typically look for proof that you will be able to live and work in the country for at least three years.
The lender’s priority is to make sure you stay and pay off the loan. Remember that, as a Green Card holder, you need to have at least two years of tax returns and credit history. Your lender may also ask you for a bank statement that is at least two months old.
If you come from a country like Canada or the United Kingdom, which has credit systems similar to those of the United States, lenders can also take into account the credit history of your country of origin.
Refugees and foreigners granted asylum can also qualify for mortgages. If you were granted asylum or you are a refugee in the US, you can apply for home loans on the same terms as a US citizen. You need to have a valid Form I-94, arrival, and departure record stamped “Employment Authorized” to prove your eligibility to work as an asylee or refugee.
This form is a word document valid for up to 90 days from your date of entry into the U.S. After the expiration of the 90-day validity of the form, you must present the employment authorization document issued by the Service of Citizenship and Immigration of the United States.
Those who live outside the United States
People who live outside of the US may have trouble obtaining conventional financing. If you do not have a valid green card or work visa, you are not eligible for a conventional mortgage or a loan backed by the United States government.
Lenders will not have enough items to evaluate your credit history. It will be more difficult to obtain a credit report if you do not live in the US Given your situation, private lenders will ask you for a down payment of 30% to 50% of the property price.
What about investment properties?
Although it is quite difficult to get a mortgage for an investment property as a foreigner, it is not impossible either.
Keep in mind that foreigners living in the United States can obtain mortgages to purchase an investment property. However, lenders can be much more demanding in terms of requirements. For example, a high credit score, proof of continuous income in the United States, and a down payment to qualify.
If you are planning to buy a property in the US that you will use for rent or just as an investment, you can also take advantage of national mortgage programs for foreigners offered by lenders such as 1st Capital Group, HSBC, and Quontic Bank.
This type of loan is only valid if you have no plans to become a permanent resident of the US and if the property will be kept as an investment. These loans tend to have higher interest rates, usually 2-4% above a normal mortgage.
Buying a commercial real estate property with a minimum required investment of $500,000 in a rural area or an investment of $1 million in an urban area may count for those applying for an EB-5 visa.
The EB-5 visa is an investment program that grants a Green Card to an individual who meets any of the above investment requirements and who hires at least 10 full-time US workers.
Can a foreigner buy a house in the United States? (Suggestion)
If you are thinking of cooperatives as an investment or property option, it is better that you discard them. It is very difficult for a foreigner to be approved by a board of cooperatives.
The approval process for a cooperative involves long and detailed financial statements, which can be difficult to comply with if your assets are abroad or if you do not have substantial employment or tax history in the United States.
Also, cooperatives often have subletting restrictions, which can make it difficult to rent an apartment if you need to return to your home country.
When you decide to sell your property
When you finally decide to leave the US and sell your home, if you are a foreigner or a non-resident, you could be in for a surprise. Please note that foreigners are subject to a 15% tax withholding.
Under the Foreign Investment in Real Estate Tax Act of 1980, when a foreign person sells a property, 15% of the proceeds from the sale are withheld at the source. There are some exceptions.
If you are subject to withholding tax, you will receive a stamped copy of IRS Form 8288-A. You must file a tax return with the stamped Form 8288-A to be credited with the taxes withheld from the sale. Some states like New York also charge non-residents a capital gains tax of 8.82%.
Now that you know that a foreigner can buy a house in the United States, what you should do is seek professional advice. Consult a real estate agent who knows the area where you want to buy, he will be able to guide you. Good luck!