Mortgages in the United States for expats and non-residents

With the USA being the third largest country in the world, you will never be limited to finding your perfect home during your plans to move there. America really does hold something for everyone, whether it being smaller quiet towns, or a bustling city surrounded by landmarks. It is an extremely popular expat destination, that is classed as one of the most multi-cultural countries in the world. Whole communities in different areas around the USA have been built to house and support specific cultures and languages, so it is clear why as an expat, it could feel like an easy place to settle and call home.

Despite the real estate in America being considered low in comparison to other countries, expats will find that most of the well-known/ most popular destinations (such as New York City) will be considerably higher than expected

In this overview, we will highlight for you some key information to be aware of, enabling you to get started on the process of securing a mortgage or purchasing property in America.

The technicalities of residency and documentation proof

Acquiring a mortgage in America can largely be dependent on your residency status. Both non-permanent residents (that hold a valid work visa) and foreign nationals (whose primary residence is not the United States) can borrow, but not without some extra hoops to jump through. Expats will find the process of buying property in the US much easier with a green card or a valid work visa.

Your options for your mortgage will vary from state to state, but the necessary checks put in place to ensure you can repay your home-loan will still apply. The main issue that non-residents find when they are asked to supply proof that they are a reliable borrower is not having any financial dealings with either a US or international bank, as these will hold a record of your US credit report, or other past financials already.

The good news is that most large global banks dominate the mortgage industry, so it is more than likely that even as an expat, you have had a bank account with one of them before.

If this is not the case and you have not had any previous accounts with international banks, it would mean that your lender would have to find another way of evaluating you as a reliable borrower, and due to how complex this process is, it may become that much harder for you to find a compliant lender willing to lend to foreign citizens.

A US mortgage specialist is key in identifying lenders that frequently work with the majority that are non-residents. They will know efficient ways to deal with the complexity of acquiring the necessary documentation, and overall are much more flexible and informed.

Non-residents on a work visa

If you are in the US under a valid work visa, you have the option to apply for a mortgage through the Federal Housing Administration (FHA). This is a government-backed loan with the same terms as given to American citizens.

If you are in the US on a work visa, you will have your own Social Security number. This would need to be provided for the FHA, along with an Employment Authorization Document (an EAD, which is more commonly known as a work permit).

Work visa’s will make lenders look for proof that you plan to live and work in the country for the next three years, to ensure that you will be able to repay your home-loan. This proof can be a letter from your employer showing that your contract with them will be renewed if it expires within that year.

As well as this, the lender will also require the standard back-dated bank statements, and at least two years of your tax return documentation/ credit history. Lenders will sometimes consider taking documented credit history from your home country when necessary, but only if that country practices credit systems that are similar to the ones in the United States (e.g. United Kingdom/ Canada).

Below is a list of the types of visas that are accepted by lenders for mortgage application as proof of your legal residency:

• H-1B and other H series visas such as H-1C, H-2, H-3 and H-4
• E series
• G series
• L series
• O series
• NATO series
• Canadian and Mexican NAFTA series

Please be aware that it is not necessary to have a B1/B2 visa, as an ESTA would work just the same for an up to 6 month stay in the USA in any 12 month period.

Taxes and fees to look out for

The fees that you would be subject to is dependent on your situation. It can vary between states, location and what type of housing you are looking at purchasing. For example, residential buildings in a location such as Manhattan come with common charges and monthly fees, so if you are looking at mortgaging a co-op apartment or condominium, it is worth knowing that it is not just the original sale price that you would be responsible for.

When purchasing a property in the US, you need to consider the future and what you will need to know in regards to ever moving again or selling your property on. For foreign citizens, it is mandatory that the IRS withhold 15% of the final purchase price. Failing to do this can result in you paying additional, unnecessary taxes. Foreigners selling property in the United States are also subject to paying Capital Gains Taxes.

Property taxes will vary hugely from state-to-state. Property taxes are calculated annually based on an assessed value of land and structures that you own. It is worth giving this some thought when deciding where abouts to move in America. In simpler terms, if you like generously spaced houses surrounded by lots of land, you might want to consider moving to a state with a lower property tax rate!

Holiday homes

Many people love the idea of escaping the norm and having a second home somewhere like the USA. Of course, it is an option… but not quite a simple one. Below is an example scenario of some key situations to consider:

Mark is from the UK.  He wants to buy a second property somewhere in the US to escape a cold, bleak winter for 6 months out of the year.

Mark still plans to work part time when he is in the UK.

He also has a medical condition effecting his joints which he thinks the warm weather will help with.

The first thing for Mark to think about is the visa that he needs to apply for. You can apply for a B1/B2 visiting visa for up to 6 months, however it is not guaranteed it will be granted. It is much easier to attain if you are retired, unlike Mark who is still working.

As a non-resident, any purchase that Mark wanted to make on a property would have to be an upfront cash-buy. To have a mortgage on this property would mean he would have to make it his main residence, which would make his holiday-home dream unachievable.  Mortgages also require you to be staying within the US in general, to continue to repay your home-loan. The lender would not approve Mark leaving for 6 months out of the year to a different country while owing on a pending mortgage.

Another obstacle to consider would be health insurance. Being in America for 6 months out of the year would require you to make sure you were covered if the worse was to happen. On top of this, pre-existing medical issues will not be cheap to insure. These things are crucial to plan for to ensure he stays cost effective.

There are so many things to think about when buying property in the US, even when its just for a part-time break! Planning and being informed is key, and you should always seek professional advice.

Get advice from a US mortgage specialist

It is always recommended to speak to a professional mortgage broker when buying overseas. There are an extreme number of variables in regards to moving to the US as a non-resident, and with so many states and varying rules and regulations, talking to a professional to avoid making costly errors is crucial. Doing this also means that you will be able to compare the best interest rates, due to your broker having access to hundreds of lenders over multiple provinces.