Mortgage in the US

The process of buying real estate in the United States really presents a number of difficulties for foreign citizens. But the reality is that many lenders are ready to provide loans to non-residents: and this is possible even without having a positive credit history in the United States. However, a potential buyer should keep in mind that the requirements for obtaining a mortgage loan still largely depend on the resident status. Most borrowers, as a rule, fall into one of the following groups:

• Permanent residents with a green card (Form I-551);
• Non-permanent residents with a valid work visa (E1, E2, H1B, H2A, H2B, H3, L1 and G1-G4);
• Foreign citizens whose main place of residence is outside the United States.

As a rule, it is much easier to get a loan for those who fall into the first two categories. Holders of a green card and a work visa are subject to almost the same rules and requirements as US citizens. By issuing a loan to foreigners living outside the United States, the bank assumes increased risks, therefore, in order to compensate for them, a significant down payment is likely to be required.

In addition to banks, a mortgage loan to foreigners can be issued by the Federal Housing Administration (FHA). However, in this case, the purchased property should be used as the main place of residence. The application will have to be accompanied by a valid social insurance number and a document confirming the right to work in the United States. This means that the agency does not issue loans to those who plan to use real estate in the United States only from time to time.

Another alternative is Credit unions. These non-profit organizations offer, as a rule, very competitive rates and may have special lending programs for holders of green cards and American visas. In this case, loans can only be taken by members of such cooperatives. Participation involves a high membership fee, but low rates for loans, if their members need them. Often, such an association includes an entire organization with all its employees. 

Advice from professionals: when choosing a bank, experts recommend contacting those institutions that are located in immigrant areas, as a rule, they have more experience working with non-residents, and they can more effectively assist clients with alternative ways to confirm their financial reliability.

Bank requirements and mortgage loan conditions

In one of the largest US banks, HSBC, foreign borrowers can get a loan in the amount of up to $ 3 million. Loan repayment terms can be chosen between fixed and floating rates, which will affect not only the percentage and the amount of monthly payments, but also the loan term. So, with a floating rate, the repayment period will be 30 years, and the rate for using the loan starts from 4%. A fixed-interest mortgage with HSBC can be taken for 15 or 30 years at a rate of 5% per annum. So, an apartment in Miami with an ocean view can be purchased for $230,000. At the initial payment in the amount of 20% ($46 000), 30- with a summer maturity and a rate in the region of 5%, monthly mortgage payments will amount to about $1,342. For more accurate data, you can go to the website of the selected bank, and use the mortgage calculator to calculate potential costs.

Large banks are ready to finance up to 75% of the estimated value of the purchased real estate. This is official information for foreign borrowers published on banks' websites, however, realtors say that in practice it is difficult for foreigners, and in particular Russians, to get a loan now even with a down payment of 50% of the cost of a residential facility.

Mortgage lending process

Step 1. Applying for a loan and preliminary approval. This stage can greatly simplify the process of obtaining a mortgage in the United States. Bank consultants check the financial component of the borrower, determine the possible loan amount and interest rate.

Step 2. Credit check. At the request of the borrower, consultants check the international credit history. Additional information may be required from the borrower to complete the credit check.

Step 3. Provision of a package of documents. In different states, the list of documents may vary slightly, but, according to common practice, it is necessary to collect papers confirming the identity of the borrower, his income, employment and the presence of assets.

Step 4. Making (closing) a transaction. During the closing of the purchase and sale transaction, the borrower signs legal documents, including those relating to the expenses necessary for the transfer of ownership. At this stage, the buyer-borrower receives all the documentation on the mortgage loan and the keys to the new house.

Required documents

The main purpose of collecting documents is the need to prove to the credit institution that lending to the borrower carries a minimum of risks. For US citizens, this is not difficult, since most of them have a credit history, a W-2 form and tax returns that track income for several years. But everything becomes more difficult for someone who has not been in the country for a long time or does not live on its territory most of the time.

How, for example, to prove your creditworthiness, in the absence of a credit report from the three main American bureaus - Equifax, TransUnion and Experian? Certain advantages are given to those who have relations with international banks with branches and branches in the USA. Given that the mortgage industry is dominated by large, global banks, there is a chance that the credit history was formed in one of them. Otherwise, it is possible to consider FHA – this organization does not require a credit report in the states and accepts tax returns from other states as proof of the borrower's employment.

Standard package of documents for obtaining a mortgage

1. Identity card: copy of passport, US visa;
2. If there is real estate in the property, it is necessary to specify the full address, attach a real estate tax invoice, an insurance invoice;
3. If the borrower rents the property, it is necessary to specify the full address, attach a copy of the lease agreement indicating monthly payments, a letter from the owner of the property;
4. Proof of employment: employer's name, postal and legal address, telephone number and email address of the employer or HR department;
5. Financial documents: bank statement for the last two months.

Depending on the type of mortgage loan and the legislation of the state in which the purchased property is located, additional documents may be required, the list of which can be clarified by a mortgage broker.

Additional costs in mortgage lending

It is more convenient to consider a number of additional payments on a concrete example, so let's go back to an apartment in Miami for $230,000. The initial payment (20%, $46,000) is made at the expense of own funds, which means that the amount of the mortgage loan is $184,000.

Basic payments:

• Payment to the bank for issuing a loan – $1500
• Payment for a certain interest rate (1% of the loan amount) – $1840

One-time payment for services:

• Real Estate Valuation – $300
• Credit Transaction Report – $0
• Estimation of the probability of flooding – $50
• Tax Services –$150
• Bank insurance – $350
• Title insurance of the owner – $350
• Inspection – $175
• Inspection of real estate for the presence of insects and pests – $100
• The fee for making a state record is $25
• Tax on transfer of ownership – $0
• Initial deposit to the escrow account – $708
• Prepaid Interest Payments – $383
• Homeowner's Insurance – $1000
• The total amount for all services is $3591

Thus, along with obtaining a mortgage, the borrower will have to pay a one-time amount of $6931. Monthly payments will amount to $1,342, of which the main body of the loan and interest is $988; taxes and insurance are $354, mortgage insurance is $0.

Expert recommendations to those who plan to take out a mortgage loan in the USA

1. Save up funds for the initial payment and transfer them to one of the US banks. The larger the down payment, the higher the probability that the loan will be approved.

2. Put all legally significant documents in order. First of all, banks pay attention to the legality of staying in the United States, as well as the availability of legal and stable income.

3. Study the conditions of mortgage lending of several financial institutions. It is worth relying not only on the information published in official sources, but also on the existing real practice. To do this, it makes sense to contact mortgage brokers who will calculate the amounts and rates individually.