Immigrant Guide to Purchasing a Home in the US.
Buying your first home is an exciting achievement, but the process can take longer and involve more steps if you’re an immigrant choosing to buy a home in the U.S. Aside from dealing with mountains of paperwork, when you’re a foreign national or resident alien looking to purchase a home in the U.S., you’ll need to understand residency requirements, visa restrictions and how mortgages and loans function.
The time and effort you put into owning a home as an immigrant is usually well worth the effort. Homeownership in the U.S. is still a great way to secure a solid financial future for yourself and your family.
There is a common misconception that foreigners and non-citizens are unable to purchase a home in the U.S., but that could not be further from the truth. While an individual’s residency status or lack thereof will determine whether they will qualify for certain loans, there are still homebuying options.
- Green card holders or lawful permanent residents (LPR): Green card holders and LPRs can sometimes secure a home with as little as 3% down payment. They also have access to the same loan services as U.S. citizens, including FHA loans and other government-backed services such as Freddie Mac and Fannie Mae. Along with having a good credit score, an LPR will also need to show their most recent tax returns, asset statements and bank statements to secure a mortgage.
- Temporary Non-Resident Aliens: Individuals who reside in the U.S. on a work visa have the option of seeking out a Federal Housing Administration (FHA) loan, but to secure the loan, they will need to provide proof of employment and a social security number. Lenders want reassurance that anyone on a work visa plans to remain in the country long enough to pay off the loan, so they may also request proof of a valid work contract that spans up to three years, along with a positive credit history, bank statements and tax returns for the previous two years.
- Refugees and asylum grantees: Anyone granted refugee status or asylum can seek out a home loan via the same government-backed services available to U.S. citizens. After a year, refugees and those granted asylum can apply for a green card and pursue homeownership after the status is granted. They can also apply for a mortgage after securing a form I-94 or an official employment authorization document and residency verification.
- DACA recipients: DACA recipients can buy a home in the U.S. as long as they intend to use it as their primary residence and have a credit score of 620 or higher, but options for financing are limited. As of Jan. 19, DACA recipients are eligible to apply for FHA loans.
- Other buyers who live outside of the U.S.: Foreign nationals can purchase a home in the U.S.; however, lenders typically require borrowers to have a social security number, an established credit score and resided in the U.S. for two years to secure a mortgage. Because of this, many overseas buyers opt to pay for their home in full at the time of purchase. According to the National Association of Realtors, 39% of homes purchased by foreign nationals in 2020 were paid for in cash. This is down from 41% for 2019, which could signal that more foreign buyers are able to finance their U.S. property purchases. While 59% of non-resident foreign buyers made an all-cash home purchase in 2020, only 27% of resident foreign buyers used all-cash financing.
Foreign nationals and anyone who finds themselves within the boundaries of the U.S., even if they don’t have residency status, are offered protection under the 14th Amendment of the Constitution, which grants the right to due process and equal protection. Other laws apply to both citizens and non-citizens as well.
Fair Housing Act (FHA)
The Fair Housing Act was passed in 1968 as a follow-up to the landmark Civil Rights Act of 1964. Even in housing, discrimination in the U.S. in the form of redlining and other exclusionary practices has historically prevented people of color and immigrants from purchasing homes in certain neighborhoods, the effects of which can still be seen and felt today. The Fair Housing Act made it illegal to discriminate in the selling, financing or renting of property to any individual based on their race, religion, national origin or sex. In 1974, this act was expanded to include gender-based protections and was then expanded again in 1988 to protect families and individuals with disabilities from discrimination.
What to Do if You Face Housing Discrimination
The U.S. Department of Housing and Urban Development (HUD) adopted several changes to the Fair Housing Act in 2020 that have made it harder to prove a discrimination case, should you have one. But that doesn’t mean that you’re on your own. If you’ve experienced discrimination at any point during your home purchasing process, there are specific steps you can take to help.
Before your first meeting with a real estate agent or mortgage broker, it’s essential to brush up on your understanding of fair housing laws, so you know how to protect yourself from discriminatory and predatory practices. It is illegal for a real estate agent to ask about your religion or immigration status, for example, nor should they make suggestions based on your ethnicity or race as to what neighborhood in which you should seek to purchase your new home.
Nearly every state is home to agencies that participate in the Fair Housing Assistance Program (FHAP). Consult the HUD website for a list of agencies that will investigate your discrimination complaint. You can also contact a civil rights or housing attorney or the National Fair Housing Alliance to help you navigate the process.
You can file a fair housing complaint (available in eight different languages) with HUD within one year of the alleged violation or in state or federal court within two years of the alleged violation. Contact HUD’s Fair Housing and Equal Opportunity Office (FHEO) via telephone at (800) 669-9777, online in English or Spanish, or by mailing or emailing a complaint form.
How to Purchase a Home in the US as an Immigrant
Permanent residents and green card holders have access to the same mortgage financing options as U.S. citizens. If you’re a foreign national living in another country, you’ll want to seek out a foreign national mortgage program or consider paying for the purchase in cash. Regardless of your current residency status, you should take some critical steps to make the home purchase process flow as smoothly as possible.
Prepare for Your Home Purchase
Before you can start picking out furniture, you’ll need to determine what the home will be used for. Will it serve as your primary residence? Are you seeking out a vacation home or investment property? Your needs will vary greatly depending on your plans for the home.
If you’re seeking out a family home as a primary residence, you’ll want to consider your home’s day-to-day functionality. You’ll need to prioritize the number of bedrooms and bathrooms, kitchen layout and amenities and proximity to parks, recreation and grocery stores. If you have school-aged children living in the residence, you’ll want to compare school districts and the area’s general safety.
If you’re purchasing a vacation home or investment property, primary consideration is given to the location, renovation costs, maintenance costs and potential return on investment.
A home’s zoning, along with any fancy features and amenities, will be reflected in the listing price. But there are even more factors that can drive up your initial down payment and even your monthly mortgage payment.
- Income and Employment Status: When securing a mortgage, potential home buyers are typically expected to provide two or more recent pay stubs and two years’ worth of income tax returns as proof of employment and financial stability. Your homebuying timeline may need to be adjusted if you need more time to obtain this documentation.
- Credit Score: Non-citizen homebuyers will need to show a 720 or better credit score, though some lenders may expect a nearly pristine credit score of 780 or better. If you have a high credit score, you can expect to secure a lower interest rate on your mortgage, whereas if you have a lower credit score, your interest rate will go up.
- Down Payment: If you don’t have residency in the U.S., you will likely need to put down a large down payment or deposit on the property which can range from 20–50% of the total cost of the property.
- HOA and Co-op Fees: Some homes are subject to rules enforced by an organization that oversees all properties and residences within a community — this is known as a homeowner’s association (HOA) or co-op and will require that a monthly fee be paid on top of your monthly mortgage payment.
Immigrant Homebuying FAQs
If you’re an immigrant looking to purchase your first home in the United States, you may have many questions. Whether it regards your residency status or your employment history, it’s important to understand what is expected of you as a potential homebuyer in the U.S. and what restrictions and responsibilities lie ahead.
An ITIN is an Individual Tax Identification Number and is required to pay federal taxes regardless of a person’s immigration status; this is different from a social security number, which can only be obtained by U.S. citizens. You can purchase a home with an ITIN number, but you’ll need to build up your credit history. Traditional banks may be hesitant to provide you with a loan, which means you’ll likely need to seek a private lender. It’s also important to note that if you have an ITIN, you can only purchase a home if you intend to live in it as your primary residence. To obtain an ITIN, you’ll need to submit form W7 via the IRS website.
Owning a property in the U.S. does not automatically grant you residency. Instead, the amount of time you can remain in the country will depend entirely on the type of visa you hold. For example, a B1 (business visa) or B2 (visitor visa) is typically valid for six months and can sometimes be extended. Other types of visas, such as the H1-B, grant foreign nationals permission to work and reside in the U.S. for a few to several years. It is best to consult the U.S. Department of State website on any matters regarding U.S. visas and residency requirements.
While not having a U.S. credit history isn’t the same thing as having a bad credit score, it’s still not an ideal scenario for a potential homebuyer. If you’re looking to secure a home mortgage, creditors will want proof that you’re a responsible borrower, usually established by showing two years of rental history, bank statements and proof of repayment of debts. To establish your credit, take steps like signing up to have your rent payments reported to the three credit bureaus — Experian, Equifax and TransUnion — or finance a smaller purchase in the meantime. If you don’t have the time to establish a credit history, you may need to consider paying for your home outright in cash.
While it might be more difficult for a low-income individual to save up for a down payment or manage their debt-to-income ratio, having a low-income does not exclude anyone from being a homeowner thanks to government-mandated programs such as FHA loans. Low-income individuals may also qualify for a USDA rural housing mortgage backed by the U.S. Department of Agriculture.
Research the Market
Before getting started on your search, you’ll need to ask yourself a few essential questions such as:
- Will this home be my primary residence?
- Is this a vacation home or investment property?
- How much time will I be spending at this property?
What you require from your property will be significantly affected by how you intend to use it. Other factors to consider are an area’s crime rates and the types of services and amenities nearby, such as parks and restaurants. Once you have a general idea of the area where you would like to have your home, visit a real estate website like Realtor.com to research and compare property values.
MONEYGEEK EXPERT TIP
Join local Facebook groups based on your interests, and look up family groups for areas you’re interested in where you can ask questions and familiarize yourself with the region through shared articles. If the area has many locally-owned restaurants and establishments, it could indicate locals are committed to and fully support the community. If you have children, Great Schools is a nonprofit school-rating service that can help you determine which schools in the area are the best. Take advantage of apps like Google View — use it to virtually walk the streets, paying attention to the landscaping, road condition and yard sizes to determine if the area suits your lifestyle.
– Alina Penjiyeva, MBA and Realtor
Establish Your Price Range and a Budget Plan
Buying a home is more than just the ability to pay the monthly mortgage. The common wisdom is that buying a home is the single most expensive purchase you will ever make, which is why you need to approach the process with a strategy. To avoid getting in over your head by buying “too much house,” you’ll want to calculate your debt-to-income ratio, keeping in mind that you will need to account for monthly utility costs, maintenance and repairs, among other expenses. Then use a mortgage calculator to estimate what your full monthly payment could be. A good rule of thumb to follow is that your debt-to-income ratio should not be more than 28% to 31%.
Bigger is not always better when it comes to buying a home. Be sure to consider all aspects of the house before going all-in. Location is one of the most prominent factors that can drive costs up or down. For example, a larger home in a less desirable area can often cost less than a smaller home in a more desirable location. But while the listing price of a home might be enticing, you’ll also need to consider the property’s condition and other factors like the charge of heating and property taxes. These are all expenses you need to be ready to handle.
Lenders prefer it when homebuyers can offer a down payment of at least 20% of the purchase price of a home in cash. You can still secure a mortgage loan for as little as 5% to 10% down, but with down payments less than 20%, borrows are required to hold private mortgage insurance (PMI), which is typically .2% to 1% of your loan. The more money you’re able to put down, the less you’ll need to borrow and the lower your payments will be each month. A mortgage calculator can help you determine how much you will pay each month based on the home price, down payment and estimated loan terms.
Don’t forget to also budget for closing costs, which could range anywhere between 2% and 5% of the purchase price. This means that if you purchase a home for $300,000, you can expect to pay between $6,000 and $15,000 in closing costs. Closing fee costs vary depending on the state, the lender and the type of loan.
Get Preapproved for Your Mortgage
A preapproval is granted to you after a lender has evaluated your entire financial history, including your bank statements, employment history, monthly expenses, credit report and credit score, usually valid for 90 days. It’s recommended that you get preapproved when you’re ready to start shopping for a home. A preapproval lets both you and prospective mortgage lenders know how much of a mortgage loan for which you qualify. A preapproval simply serves as proof that a lender would be willing to give you a loan, which will make real estate agents more eager to work with you.
Qualify for a Mortgage
If you’re an immigrant or visa holder looking to secure a mortgage, the single most important tool in your arsenal will be your social security or taxpayer identification number (ITIN). Even if you’re undocumented, as long as you have an ITIN, you could qualify for mortgage assistance from private lenders.
Once you are ready to apply for a mortgage, be prepared to show:
- Paystubs for the last 30 days or other proof of current employment.
- Proof of income (W-2s and 1099s) for the last two years. Any income received from overseas or in a foreign currency must be converted to USD.
- Federal income tax returns for the last two years, including all schedules and attachments. These must be translated into English if in a foreign language.
- Government-issued photo ID and, if applicable, resident alien card.
- Your two most previous bank statements for all bank accounts (borrower and co-borrower). These must be translated into English if in a foreign language.
- Your two most previous investment account statements (borrower and co-borrower). These must be translated into English if in a foreign language.
There are several loan options available to immigrants, permanent residents and non-residents alike, including:
- Conventional Loan: The journey to a conventional loan starts at your local bank. Borrowers can secure a conventional loan with as little as a 3% down payment. You’ll want to aim for a credit score of 620 or higher, but keep in mind that the higher your score, the better rate you’ll get on your mortgage.
- USDA Loan: A USDA loan does not stipulate a minimum credit score, but it’s recommended that you have a score of at least 640 to qualify.
- Federal Housing Administration (FHA) Loan: In 2021, you can apply for an FHA loan with a minimum credit score of 500 and a 10% down payment. Borrowers with a credit score of 580 may be able to secure a loan with as little as a 3.5% down payment.
- Federal National Mortgage Association (FNMA/Fannie Mae): Fannie Mae guarantees mortgages issued by credit unions and other financial institutions.
- HSBC: HSBC is a bank that offers U.S. mortgages and home loans for international clients living overseas.
Find and Choose the Right Agent
Buying a home can be a complicated experience, which could be why 74% of buyers choose to work with a capable real estate agent. The majority of buyers tend to find their real estate agent either through word of mouth referrals from a friend or colleague or directly from a real estate website or app. Before you agree to take on an agent, make sure to do some research; visit their website, read a few reviews and even set up a time to interview them to see if they are trustworthy and knowledgeable about the local market.
Meet Your Future Home
Zeroing in on the neighborhood and establishing your price range should be the first step you make as a house hunter. Whether you visit an open house on your own or are on an agent-guided walkthrough, ask questions about the home’s energy efficiency, parking options and neighborhood safety. Take note of any desired characteristics — such as kitchen style, flooring and appliances. Is the home accessible to public transportation? How close is it to your job or extended family? Be prepared with a checklist to ensure that your future home offers everything you need to live comfortably.
Make an Offer
Once you’ve found a house you’d like to purchase, the next step is to make an offer. At this point, you’ll typically consult with your real estate agent, who will draft an offer letter to send to the seller. The offer letter is a legally binding document reflecting the real estate laws of the state in which you are purchasing your home. It will include the amount you’re willing to pay on the house, your down payment amount, whether or not you’ve been preapproved for a mortgage and any other details or negotiations you feel might make you stand out from the other potential buyers.
Schedule a Home Inspection and Appraisal
Before you put your final offer in writing, make sure you opt for both an appraisal and a home inspection. An appraisal is a process by which your home’s market value is determined and will be arranged by your mortgage lender.
On the other hand, a home inspection is an essential tool for uncovering any property issues. A certified home inspector will examine the home structure and check the roof, electrical system, plumbing, basement and attic (if applicable) for any issues that exist or could arise in the future. As the home buyer, you will be responsible for scheduling and paying for a home inspection — usually with your real estate agent’s help — but it is worth the investment.
Close the Deal
The day has arrived — it’s time to close escrow and get the keys to your new home. If you live in the U.S., you’ll meet with your real estate agent to sign all paperwork, including mortgage documents, repairs uncovered by your home inspector and details of the down payment and closing costs.
If you live overseas, you can mail the signed paperwork to a closing agent, assign someone “power of attorney” to sign the paperwork on your behalf, or submit the signed paperwork via electronic signature or email, depending on the laws of the state in which you’re making the purchase. It’s recommended that you close on your home near the end of the month because that will give you more breathing room between when your first mortgage payment is due and the amount of interest you’ll need to pay.
Are you ready to take the next step to buy your home and start building a legacy for your family?…Let me help you!
I am a Brazilian Licensed Realtor at Re-Connect, LLC with 17+ years of experience in the Real Estate industry. I speaks 3 languages (Portuguese, English, Spanish)