You feel like you’re traveling every other week to the US for work. Getting a hotel room this often on top of paying for plane tickets is beginning to weigh on your wallet. It will be expensive in the long run, but maybe buying a house is in order.
Constant travel is only one reason to look into how to buy real estate as a non-citizen. You can also buy a property and sell it to someone else who spends a good portion of their time flying to the US, and there are tax benefits to take advantage of.
We can walk you through the buying process so you can get your hands on a piece of property. Keep reading to learn how to get started.
Can a Non-Citizen Purchase Real Estate in the US?
The first question that we’re going to be answering is, can foreigners buy land in the US? The answer is yes. There’s no citizenship requirement when it comes to purchasing a property.
Unless your country has rules in place that would make getting these condos for sale difficult, it could actually pay off for you to make the investment.
Things to Know Before Moving Forward
While the buying process is pretty easy to get through, you’ll run into your fair share of complications when trying to get a loan for the property.
You won’t have access to the same advantages that US buyers do. Lenders are a little tougher on non-citizens who try to get a mortgage. When you do get a loan, you’ll have to deal with the high interest rates.
You Won’t Have Access to Freddie Mac or Fannie Mae Loans
Freddie Mac and Fannie Mae are mortgage companies that are backed by the government. They buy mortgages from lenders and keep the market a little more stabilized.
They won’t buy mortgages taken out by non-US citizens, so lenders have to keep them in their books. This makes getting a loan a little more difficult for you. Banks don’t like the idea of not being able to sell to the secondary market.
There’s a Tough Approval Process
The US real estate market is tough for those who live in the country, let alone for those who live outside it. There are many reasons for this. The first is that it’s hard for banks to track delinquent buyers who live overseas.
You also don’t have American tax returns or credit history. Lenders will instead ask for tax returns that you’ve filed in your own country.
They may also want to see your bank account statements. This way, they can see that you’re a responsible spender that can handle their mortgage payments.
There Are High Interest Rates
When you go to a lender to talk about what your mortgage options are, you’ll notice that you don’t have that many. The bank will most likely only be willing to give you a non-conforming loan. There are benefits of these loans.
You don’t need a brilliant credit score to get them. There are certain properties that you can get with a non-conforming loan that you can’t get with a conforming one as well. The only setback is the fact that the interest rate can be much more trying on the wallet.
It Will Take Longer
Since the approval process is a little stricter for non-citizens, it takes a lot longer to process. There is one way that you can speed things along if you need your property in the near future.
Apply for your loan at a global bank that has branches in both your country and the US. Doing this could help decrease your interest rate a little bit too.
Talk to the Right Real Estate Agent
If you still want to move forward with buying real estate in the US after reading what we’ve had to say so far, you’re going to need an experienced real estate agent on your side. You’ll have to get someone that doesn’t only have expertise in local housing. They should know about the complexities that go into buying land as a non-citizen as well.
Look for someone who has a CIPS designation. These agents have completed specific coursework that helps them deal in estate transactions between the US and foreign countries.
They often know how to speak in other languages, too, which could make communication between you and the home seller go a lot smoother.
Other Professionals to Consider Hiring
Some states require that you hire a real estate attorney to help you take care of your paperwork. You may also want to hire a tax attorney.
The taxes associated with buying US property can get a bit confusing. Navigating through it can be difficult unless you have the right professional at your side.
Get Your ITIN
Everyone who is a US citizen, permanent citizen, or a temporary citizen living in the states for work or school has something known as a social security number. You’ll need this number if you want to get a bank account and apply for a mortgage.
If you don’t have a social security number, don’t worry. There’s still a way for you to get that loan you’re trying to get. The answer is an ITIN number.
To get one, you’ll need to fill out a W-7 on the IRS’s website. To be considered for a number, you’ll have to provide at least two forms of ID. This can be a passport, foreign military ID card, or a foreign driver’s license.
Prepare the Proper Documentation
Now that you have an ITIN, you can begin looking around at your mortgage options. Before you head to a bank, there are a few documents that you’ll need to gather up.
The lender is going to want a foreign passport or visa, pay stubs, a tax return, a bank statement, and maybe a credit score, depending on your situation. Again, there’s a way to get around needing a credit score, but if you can’t, you’ll need to start working on getting a report.
Have a Good Credit Score
The easiest way to build up credit is to get a US bank account and open a credit card. There are card options that you can get even without a credit history.
As soon as your card comes in the mail, you’ll need to sit down and budget. If you sit on the card, it’s not going to do much for your credit. You’ll have to spend some of the money, but don’t go overboard.
If you use more than you can pay back, it will make for a bumpy start. After a while of making regular credit card payments, you should be all set to apply for your mortgage.
Getting a Property Loan as a Permanent Resident
Getting a property loan works a little differently depending on if you’re a permanent resident, non-permanent resident, or non-resident. We’ll go over how it works as a permanent resident first.
Permanent residents are those not born in the US, but currently holding a green card and social security number. For these people, applying for a mortgage and getting a home works much like it would for normal residents.
Obtaining a Loan as a Non-Permanent Resident
Non-permanent residents are in the US on a work visa or by some other means. These residents don’t have a green card, but they do have a social security number. This means they can apply for a mortgage.
There is a stipulation. They have to show the bank that they’re able to work in the states for the next three years. If their visa drops before then, the lender may still work with them, as long as they have the intention to become a citizen after the visa’s expiration date.
Purchasing as a Non-Resident
Those who aren’t a resident of the US can still buy property. They won’t be able to get a traditional mortgage, but they can still get a loan through a private lender. There’s also the option of paying for the house with cash.
Paying for the house with cash is a fast way to go about it. It’s also easier than having to deal with a bank. Still, there are some downsides to going this route.
It takes years for a house’s true value to peak. At that point, you could have made more by putting your cash toward a different investment.
There are more benefits of taking out a mortgage. You’ll strengthen your financial portfolio, which will give you more buying power if you want to put your money toward other assets in the future.
When your home goes up in value, you’ll get more of a return on investment. As you pay on the mortgage, you’ll also build equity.
Over time, you’ll be able to use this equity for other purchases. You’ll need to put this money back soon after you take it out, but it’s a great option for emergency cash.
You’ll Need a Downpayment
Nobody can get away with getting a mortgage without putting down a significant downpayment. For non-citizens, this downpayment is much higher than normal because of the risks involved.
Don’t be surprised if the lender asks you to pay 30% or more. The amount can vary from bank to bank. If you take some time to build your credit before taking out the mortgage, you may be able to get away with a lower payment as well.
No matter who you are, you’ll have to pay closing costs before the house seller hands you the keys to the property. This process involves a lot of paperwork. If you don’t live in the US, closing gets expensive.
There’s a chance that you’ll have to travel to the states multiple times before you’ve finished the entire process. That’s a lot of money in travel fees!
We recommend using a power of attorney. What this means is that you can appoint someone in the U.S to take care of the buying and selling.
Taxes to Be Aware Of
Now on to the least fun part of buying property in the US. Handling your taxes. Since you have property in the states now, you’ll have no choice but to file a return. You can, of course, hire a tax professional since this is a new process for you. However, there are programs that allow you to file your taxes for free should you decide to handle your tax filing on your own.
For foreign buyers, it will be a while before you’ll have to pay these taxes. There are only two exceptions that you need to be aware of.
Capital Gains Tax
If you decide at any point that you want to sell your property, you’ll have to pay a capital gains tax. How much you pay will be determined based on how long you had the property before you got rid of it.
You might be able to get around this tax by swapping out your current home with one of the same type. You shouldn’t bank on this option being available to you, however.
An estate tax is on property that’s been transferred from a homeowner to their heirs after they pass away. To protect those you love and take care of this tax, we recommend taking out an inexpensive life insurance policy.
How to Buy Real Estate in the US if You’re Not a Citizen
Are you getting tired of traveling in and out of the US all the time for work? Give yourself a place to stay while you’re in the states by purchasing a piece of property.
Learning how to buy real estate isn’t as bad as you may think. As long as you have an experienced agent on your side and follow the steps we’ve discussed here today, you’ll close on a house before you know it.
Now that you’ve gotten the keys to your home, it’s time to make it yours. Visit the Interior Design section of our blog to get a few amazing ideas.